No Worries over Gas Sources?

Reportedly, the National Development and Reform Commission has
approved the construction of a natural gas pipeline from the
northwest to the south. The annual transmission capacity of the
pipeline will reach 30.0 billion m3/a, more than double the
capacity of the west-east gas pipeline from Xinjiang to Shanghai.
Design of a pipeline running from Xinjiang to Guangzhou will be
started at the end of 2006 and be put into use in 2009. Most
importantly, the pipeline will transmit natural gas imported
from Turkmenistan.

The specific route of the second phase pipeline is not yet
decided

The west-east gas pipeline was completed and put into commercial
operation in October 2004. Based on the data provided by CNPC
West-East Gas Pipeline Company, the amount of natural gas
transmitted from the west to the east was 1.3 billion m3 in 2004.
With the completion of a series of matched facilities, the amount
will reach 8.0 billion m3 in 2006 and 12.0 billion m3 in 2007.
    According to experts from CNPC Plan & Design Institute, the
natural gas pipeline from Xinjiang to Guangzhou is in fact the
second phase of the west-east gas transmission project. The
specific route of the second phase pipeline is not yet decided
today. The concept has already been included in the Eleventh
Five-year Program (2006-2010).
     In Chapter 12, " Optimize the Development of the Energy
Industry " of the Outline of the Eleventh Five-year Program for
the National Economy and Social Development, passed in the
Fourth Session of the Tenth National People's Congress held in
March 2006 , it is explicitly defined that "the development of
oil and natural gas should be accelerated " and " the
construction of oil/gas pipelines and matched facilities should
be speeded up to improve oil/gas pipeline networks in China and
construct the second west-east gas pipeline and onshore imported
oil/gas pipelines at an optimal time."
    It can therefore be seen that the Central Government has
already made an overall consideration to the west-east gas
transmission project. The time for execution is up to specific
conditions and opportunities. The consumption of natural gas in
China was 46.0 billion m3 in 2005. Natural gas is less than 3%
of the primary energy consumption structure - far lower than the
worldwide average of 25% and also lower than the average level
of 8.8% in Asia. Without doubt the second phase of the west-east
gas transmission project will have a positive impact on the
increase of the natural gas as a proportion of overall energy
consumption and on the improvement of the energy consumption
composition in China.

Gas sources in Xinjiang may become insufficient

The reply of experts to the question of the sufficiency of gas
resources is that natural gas resources in Xinjiang are
sufficient to guarantee the demand of the second phase of the
west-east gas transmission project. The major natural gas source
is the Tarim Basin with other reserves in the Tuha Basin and the
Zenger Basin.
    The latest evaluation of oil/gas resources shows that the
Tarim Basin has sufficient reserves and huge development
potential. By the end of 2003, the proven gas geological reserves
amounted to 622.4 billion m3 and the proven gas reserves
accounted for 7.8% of the total gas resources. The expected gas
reserves in all of Xinjiang reach as high as 10 800 billion m3,
accounting for a quarter of the total expected onshore gas
reserves in China. The proven gas reserves also reach 975.3
billion m3. According to the overall program of the state, 6 gas
fields (1 big and 5 medium) in the Tarim Basin will supply natural
gas to the west-east gas transmission project in the initial
stage. First gas sources include Yaha, Kela 2 and Sangnan-Jilake.
Production was already started at Yaha Condensate Gas Field in
October 2000 and began to supply natural gas to the west-east
gas transmission project from September 1st, 2004. Kela 2 Gas
Field is the biggest integral gas field in China. Its reserves
reach 205.16 billion m3 and production was already started on
December 1st, 2004.
     By the end of 2004, the Tarim Basin acquired a natural gas
supply capacity of 7.6 billion m3/a to the west-east gas
transmission project. In addition, the latest evaluation of
oil/gas resources shows the Changqing gas region in the Erdos
Basin, as one of the first gas sources, has gas reserves of 10
700 billion m3. By the end of 2003, the proven gas geological
reserves in the region amounted to 1 100 billion m3 and the
recoverable reserves were 708.3 billion m3.  The rate of the
proven gas reserves was only 10.3%. Changqing gas region has
acquired a natural gas supply capacity of 7.4 billion m3/a. In
addition to ensuring gas supply to Beijing, Tianjin, Hebei
province and Shandong province, it will also be used as a standby
gas source for the west-east gas transmission project.   
     CNPC Tarim Oilfield Company has recently discovered
another huge gas field called Dabei Oil/Gas Field. The reserves
of the gas field are second only to Kela 2. The reserves are
expected to be 150 billion m3 and the proven reserves have
already reached 100 billion m3.
     According to the Eleventh Five-year programs made by CNPC
and Sinopec, the well head output of natural gas in Xinjiang will
reach 31.5 billion m3 in 2010 and the industrial output will be
30.0 billion m3. (The industrial output refers to the usable
amount after deducting the production, handling and
transmission loss from the well head output.)
     Judging from the present and future actual output of
natural gas in Xinjiang, therefore, there will be some
difficulty in meeting the natural gas demand of 42.0 billion m3
in the west-east gas transmission project already in operation
and the second-phase of the west-east gas transmission project
under programming.

Gas sources in Mid-Asia will hopefully make the substitution

"The import of natural gas from Turkmenistan is intended only
for a possible substitution in the future," said experts.
     The president of Turkmenistan paid his third visit to China
on April 3rd, 2006. He signed the "Joint Declaration between the
People's Republic of China and Turkmenistan" with Chinese
representatives. It is pointed out in the document that relevant
departments of the two countries will speed up the research and
execution of the Sino-Turkmenistan natural gas pipeline project.
He also signed two specific agreements. One is the "General
Agreement on the Execution of the Natural Gas Pipeline Project
between the Governments of China and Turkmenistan and the Sales
of Natural Gas by Turkmenistan to China." The other is the
"Agreement on the Cooperation between the Ministry of Industry
and Natural Resources of Turkmenistan and China National
Petroleum Corporation in the Oil/Gas Sector."
   The expected natural gas reserves in Turkmenistan amount to
22 800 billion m3, ranking third in the world next to the Middle
East and Russia and accounting for around 15.8% of the world's
total remaining natural gas reserves. The remaining recoverable
natural gas reserves are 2 860 billion m3. Turkmenistan plans
to produce 120 billion m3 of natural gas an