Energy

CNPC inks deal with Uzbekistan

By Wan Zhihong (China Daily)
Updated: 2010-06-11 09:34

Natural gas agreement to supply China with 10b cu m annually

BEIJING - China National Petroleum Corp (CNPC), the country's largest oil and gas producer, has signed an agreement with the national oil company of Uzbekistan to buy 10 billion cubic meters of natural gas per year from the Central Asian country, CNPC said on Thursday.

CNPC workers check a gas pipeline, part of the West-East natural gas transportation project in Hubei province. Natural gas consumption will account for 10 percent of China’s annual total energy consumption by 2020, up from the current level of 3.9 percent. [YAN PING / FOR CHINA DAILY]

CNPC and Uzbekneftegaz signed a framework agreement for gas on Wednesday afternoon. China and Uzbekistan also signed a memorandum of understanding to expand their cooperation in the area of natural gas, CNPC said.

Both countries will also take active measures to connect Uzbekistan's gas transmission system with the China-Uzbekistan gas pipeline, said a CNPC statement.

The pipeline is part of the China-Central Asia gas pipeline that came into operation in December 2009, linking gas fields in Turkmenistan, Uzbekistan, and Kazakhstan to China's Xinjiang Uygur autonomous region.

The deal, one of a series of oil and gas deals between China and Central Asian countries in recent years, indicates the importance of energy cooperation between these countries, said analysts.

"Many Central Asian countries are rich in natural resources. Cooperation with these countries will play an increasingly important role in China's energy strategy," said Xia Yishan, an expert at the China Institute of International Studies.

The China-Central Asia gas pipeline, at a length of 1,833 kilometers, is China's first large pipeline project to import natural gas. It starts at the Turkmenistan-Uzbekistan border and runs through central Uzbekistan and southern Kazakhstan to China's Xinjiang.

At Horgos in Xinjiang, the pipeline is connected with China's second West-East gas pipeline, which extends 8,653 km across 14 provinces, municipalities and regions, including Shanghai and Hong Kong.

With the rapid increase in natural gas consumption in China, the country is expected to see more gas imports in the future, said analysts.

Natural gas consumption will account for 10 percent of China's annual total primary energy consumption by 2020 from the current 3.9 percent level, Zhou Jiping, vice-president of CNPC, said on Tuesday.

Related readings:  CNPC signs gas supply agreement with Uzbek oil company   CNPC set to buy 35% stake in Shell's Syria unit  Shell, China's CNPC sign Qatar gas deal  China's oil refining capacity ranks 2nd in the world

China will consume 300 billion cubic meters of natural gas annually by 2020, Zhou said at the 2010 International Oil and Gas Conference.

As China's leading producer of natural gas, CNPC produced 68.3 billion cubic meters of natural gas in 2009, accounting for 80 percent of the nation's total production.

Compared with other fossil fuels such as coal and oil, China's consumption of natural gas will grow more rapidly, which is in line with the government's plan to use more clean energy, said Lin Boqiang, a professor at Xiamen University.

China raised the wholesale price of natural gas by around 25 percent earlier this month to better allocate resources. Natural gas benchmark prices will go up by 230 yuan to 1,155 yuan per thousand cubic meters, according to the National Development and Reform Commission.