Underground Gas Storage Capacity ''Key to Energy Security

Underground natural gas storage capacity should be expanded to increase the nation's strategic energy reserves and ensure supply, said a senior official from China Petrochemical Corp (Sinopec), the country's biggest refiner.

Sun Jian, general manager of the Jianghan Oilfield Branch of Sinopec, who is also a deputy of the National People's Congress, said during the two sessions that China should build more underground storage facilities along with increased exploration and an expansion of the pipeline network.

China, as the third-biggest natural gas user in the world, consumed 176.1 billion cubic meters of natural gas last year, five times the level of a decade earlier.

However, Sun said the country does not have enough storage facilities for the fuel, and the ones that exist are poorly located.

As of Dec 31, there were 20 underground storage facilities with total capacity of 4.2 bcm, accounting for only 2.4 percent of annual consumption, which is far below the international standard of 10 to 15 percent.

In the natural gas industry, underground storage is considered the optimal means of coping with seasonal changes in demand. But only 2.8 bcm of China's storage capacity was deemed suitable for that purpose.

Sun said that China should do more in this area, since domestic companies possess the technology to build storage facilities and suitable geological locations exist in central parts of the country, as well as between the Yangtze and Huaihe rivers.

"The government needs to develop the policies for land, taxes and subsidies for underground natural gas storage construction," he said.

According to the CNPC Economics and Technology Research Institute, two underground natural gas storage facilities are under construction. One is owned by the country's biggest natural gas producer, China National Petroleum Corp, and it is scheduled to open this year.

The other, which will be completed in 2016, belongs to the Hong Kong and China Gas Co Ltd.

Preliminary work is being done on four other facilities, which are owned by Sinopec and CNPC, according to the institute.

Zhu Gongshan, who is chairman of GCL-Poly Energy Holdings Ltd, one of the world's largest suppliers of polysilicon, and a member of the National Committee of the Chinese People's Political Consultative Conference, said during the two sessions that China should further encourage the use of natural gas.

Specifically, he called for tax breaks for natural gas-powered electricity generation.

Li Xiaolin, chairman of China Power International Development Ltd and a CPPCC member, said that China needs to raise the percentage of natural gas consumption in the country's energy mix.

According to the International Energy Agency, global gas demand will grow 2.7 percent annually in the coming five years. China's demand for this clean energy will increase to 273 bcm during the period, accounting for about one-quarter of the world's demand.