China: Fund for risky gas projects proposed

Petroleum News

According to a Sept. 13 MarketWatch report by David Winning, a Chinese official is urging his country to “set up a special fund to encourage its state oil companies to take on high-risk natural gas projects at home and overseas.”

Bai Rongchun, the former director general of the National Development and Reform Commission’s Energy Bureau, said Sept. 12 that a fund would contribute to resource security, especially since China’s communities want clean energy and demand for natural gas is increasing from power generators and industrial users that are switching from oil and coal.

“China needs such a fund,” Bai told attendees at the 2007 China Natural Gas Supply Forum in Beijing.

“If it’s going to be established, then it should cover two areas — exploration in China and exploration overseas,” Bai said.

Gas production from China’s three oil and gas companies — PetroChina Co., China Petroleum & Chemical Corp. (Sinopec), and Cnooc Ltd. — is increasing annually “at double-digit rates, but not enough to keep pace with demand, as the fuel is cleaner than coal and cheaper than oil due to a state-controlled pricing mechanism,” the MarketWatch report said.

Bai’s comments, the article said, likely reflects “concerns among Beijing’s leaders that state oil companies are willing to shelve plans to bring risky natural gas fields on stream because of the strain they put on exploration budgets.”

For China, the world’s second-largest energy consumer after the United States, “stimulating new investment in its natural gas sector is crucial if national targets for consumption of the cleaner fuel are to be met,” MarketWatch said.

The article reported Bai said that a consensus hasn’t been reached yet on the size of an exploration fund, but it “won’t be very small” because of the high costs of exploring and developing natural gas prospects.

MarketWatch said it’s “likely that the central government will take a lead role” in establishing a high-risk gas fund because it is looking “to put to use some of its $1.33 trillion in foreign exchange holdings at a time when China’s energy insecurity is growing.”

See the full article at www.marketwatch.com/news/story/china-official-urges-special-fund/story.aspx?guid=%7B720EE44F-3553-4310-A927-3E7BF05C2D42%7D