China’s first coal-to-gas plant soon to pump gas to Beijing

BEIJING - China's first coal-to-gas (CTG) project will soon start pumping gas to capital city Beijing to help meet winter heating demand, coming online after a one-year delay due to an unfinished pipeline, said an industry official involved on the project.

China is spending US$14 billion (S$17.4 billion) on projects to turn coal in remote regions into natural gas, a costly bet that could help meet the country's surging demand for the fuel.

State-owned utility Datang Power, parent of Datang International Power Generation Co Ltd , expects to switch on the taps in the coming weeks at its pilot CTG plant in north China's Inner Mongolia to deliver an initial 4 million cubic metres of gas each day to Beijing.

The project was ready for operation in July last year, but construction of the last leg of a 430-kilometre pipeline being built by a unit of state energy giant PetroChina has taken longer than expected.

"PetroChina's delay in building the pipeline is the main reason for the project delay," said the industry official, adding that Datang has already built the portion of the pipeline from the Inner Mongolia plant to the border of Beijing.

PetroChina, China's top oil and gas producer, is the main operator of the country's 53,000 kilometres of pipelines that connect gas fields to the main consumption centres.

While the state sets pipeline transmission fees, PetroChina has a big say in whose gas gets delivered into the trunklines first at what price, which has been a source of complaint among smaller, newer gas producers such as coalbed methane explorers.

A PetroChina press official was unable to provide immediate comment.

The Datang plant, costing a total of around 25.7 billion yuan (S$5.24 billion) according to state media Xinhua, is the first of four CTG pilot projects Beijing has approved that are expected to supply 15 bcm of natural gas a year by 2015, around 7 per cent of China's gas demand expected for that year.

The Chinese government has over the past few weeks called for boosting gas supplies, including from new suppliers like Datang, as demand for the fuel rose faster than expected.

Beijing is expected to see gas use hit a record 80 million cubic metres per day during the peak heating period in the coming winter months, the government said.

Datang is already building the second phase of the Inner Mongolia plant, and expects to start operation in the third quarter of 2014, the company has said.

A following third-stage investment will boost total capacity at the plant to 4 bcm/year in 2015, from an initial capacity of about 1.33 bcm/year.