Beijing Gas Group plans to spend $1.2 billion a year on pipelines, storage

Beijing Gas Group wants to expand into upstream gas businesses as well as infrastructure to receive liquefied natural gas.

By: Reuters | Beijing | Updated: September 23, 2016 11:06 am

Beijing Gas Group said it plans to spend up to $1.2 billion a year over 2017 and 2018 to build pipelines and storage to meet a surge in demand for the cleaner-burning fuel in the Chinese capital and beyond by the end of the decade.

State-owned Beijing Gas, the dominant natural gas distributor to the city, wants to expand into upstream gas businesses as well as infrastructure to receive liquefied natural gas (LNG), Li Yalan, the firm’s chairwoman, said.

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The firm, which distributes 16 billion cubic metres (bcm) of natural gas annually to Beijing’s 23 million people, awarded last month its first tender to purchase LNG to France’s Engie .

“We are well on track to executing our longer-term strategy, which is extending to upstream and downstream businesses and combining supplies of fuel, both domestic and overseas,” Li said on the sidelines of a gas conference.

With Beijing’s gas consumption set to reach 20 bcm a year by 2020, up 44 percent from 2015, and with new demand from rural areas, the company plans annual spending of 5-8 billion yuan ($750 million-$1.20 billion) over the next two years, Li said.

Spending was being increased to help replace coal with gas, with Beijing expected to phase out completely by next March coal for local power generation, she said.

On the upstream side, Beijing Gas is looking at potential equity investments in gas distribution in Indonesia as well as partnership with smaller city gas distributors in China, said Li.

The parent firm, Beijing Enterprises Group Company, is in the process of finalise a deal to aquire a 20 percent stake from a unit of Russian oil giant Rosneft, which will help Beijing Gas branch into oil and gas exploration, said Li.

As China prepares to free up the state-dominated gas market, Beijing Gas is also looking to expand into the terminal business, Li said.

The company was scouting for a coastal site to build its own LNG receiving terminal, with facilities able to store 500-600 million cubic metres of gas to cover any emergency shortage, said Li. The firm currently owns a small share in a PetroChina-controlled terminal in Tangshang, near Beijing.