Page 10 - AsianOil Week 37

AsianOil EAST ASIA AsianOil

Chinese power sector’s gas use to shrink

PERFORMANCE CHINA’S gas-fired generating sector is strug- chosen to limit gas power development as part of
gling to stay afloat as the twin pressures of lower its policy of energy security.
tariffs and the ongoing trade war could push Gas is losing out because much gas power
demand for feedstock down by 17% by 2025. technology used in China still relies heavily on
Beijing has been reducing regulated gas-fired imported technology from global players includ-
power tariffs by 16% to 28% in key provincial ing Mitsubishi, Siemens and General Electric.
markets since June 2020, Wood Mackenzie said Furthermore, China’s LNG imports also surged
this week, driven by the political goals of reduc- by 12% in 2019. By 2025, around 8bn cubic
ing end-user power prices and improving man- metres per year, or 17%, of gas demand for power
ufacturing competitiveness. The falling tariffs generation in four coastal markets could be at
come in the wake of trade tensions with the US. risk due to fewer new builds and lower utilisation
Wood Mackenzie said that power tariffs for hours as a result of poor economics.
industries in China had now fallen by 25% in the Wood Mackenzie estimates around 7 GW
last three years. out of 17 GW of gas-fired power projects
Gas-fired power tariffs at some higher-uti- scheduled for commissioning between 2022
lised gas plants have even been lowered to a level and 2025 to be at risk as a result of delays or
similar to the much cheaper coal-fired power. cancellations. These projects are located in the
This coal parity initiative has a huge impact coastal provinces of Zhejiang, Jiangsu, Shang-
on the economics of the current gas fleet and hai and Guangdong.
investment decisions for new units. However, Yu said all is not doom and gloom.
“The new regulations will cause at least a 5 to 6 China has recovered rapidly from the COVID-
percentage point decline in the already poor mar- 19 pandemic, posting an average of over 4%
gins of gas power plants. Delivered fuel costs at power demand growth since May.
most gas power plants have only declined by 10% to He said: “We expect China to contribute close
13%, while revenues have been cut by 16% to 28% to half of global power demand growth in the
due to the new regulations. Most projects are now next decade, which means the country will need
loss-making or barely breaking even,” said Wood to develop all power supply options including
Mackenzie principal consultant Frank Yu. gas. If power markets become tighter in coastal
Despite strong demand growth for sources of China, local governments may have to reverse
electricity that are cleaner than coal, Beijing has these policies.”™

OCEANIA

State Gas’ CBM output soars

PROJECTS & AUSTRALIAN junior State Gas has announced three holes in an initial exploration and appraisal
COMPANIES an “exponential” increase in coal-bed methane programme, which included the Serocold-1 and
(CBM) at its wholly owned Reid’s Dome project Aldinga East-1A wells.
in the Bowen Basin. State Gas announced on September 11 that
The company said on September 16 that flow rates at both Nyanda-4 and Serocold-1 con-
overnight flow rates at its Nyanda-4 well, which tinued to build. While noting that Nyanda-4 was
is located in petroleum lease (PL) 231, had flowing 128,000 cubic feet (3,600 cubic metres)
reached more than 240,000 cubic feet (6,800 per day, the company said simply that Sero-
cubic metres) per day. cold-1’s output was increasing.
State Gas executive chairman Richard Cot- Previous well bore damage has limited the
tee said the production jump had followed the depth at which Serocold-1’s pump could be
installation of custom-built pumping equipment placed, leaving around half of the targeted coal
from Canada. seams below the pump. However, State Gas said
“Seeing the well improve gas production the gradual increase in flow rates was encourag-
and now exceed previous flow rates using the ing and boded well for the future. It added that
customised pumps is very encouraging for the water production at both wells remained low,
development of the whole Reid’s Dome gas field,” providing further “positive signs” for the field’s
Cottee said. future production potential.
Nyanda-4, which is located in the southern State Gas said this week Nyanda-4’s dramatic
region of PL231, was drilled in late 2018. The production increase, coupled with the tighten-
well intersected 40 metres net coal, 25 metres ing supply outlook on the East Coast gas mar-
of carbonaceous shales as well as a number of ket, provided further support for commercial
conventional tight gas sands. It was the first of production from PL231.™

P10 www. NEWSBASE .com Week 37 17•September•2020