The total investment in the West-to-East Gas Pipeline Project Phase III may exceed 100 billion yuan.-China Titanium

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The total investment in the West-to-East Gas Pipeline Project Phase III may exceed 100 billion yuan.

It is learned from informed sources that, one of the important domestic natural gas pipelines, the West-to-East Gas Pipeline Line 3 (hereinafter referred to as West Line 3), is expected to start construction this year. The entire project is likely to cover ten provinces and cities in China, and its first station will remain the same as West-to-East Gas Pipeline Line 1 and Line 2.

Publish Time:

2020-05-10

The total investment in the West-to-East Gas Pipeline Project Phase III may exceed 100 billion yuan.

　　According to informed sources, construction of the West-East Gas Pipeline III (referred to as "West III"), one of China's major natural gas pipelines, is expected to commence this year. The project is likely to cover ten provinces and municipalities across the country. Like the West-East Gas Pipelines I and II, it will originate in Xinjiang, with parts of the pipeline running parallel to the West-East Gas Pipeline II. The total investment is expected to exceed 100 billion RMB, with the gas source remaining Central Asia.

　　Pipeline II and III may run parallel

　　Currently, 100 million households and over 400 million urban residents in China use natural gas.

　　China currently has two natural gas pipelines: West-East Gas Pipeline I (referred to as "West I") and West-East Gas Pipeline II (referred to as "West II"). West I primarily uses the Tarim Gas Field in Xinjiang as its gas source and targets the Yangtze River Delta as its main market. The pipeline runs approximately 4,000 kilometers from Lunnan, Xinjiang to Baihe Town, Shanghai. Its total gas transmission volume has reached 17 billion cubic meters, its design capacity.

　　West II is a strategic channel project for China to import natural gas resources from abroad (Central Asia). It is 4,978 kilometers long, with eight branch lines totaling 3,726 kilometers. The main line went into operation on June 30, 2011. Data from CNPC shows that the gas transmission volume of West II will be 17 billion cubic meters this year and may reach 30 billion cubic meters next year.

　　It is understood that West III will also source gas from Central Asia and, like West I and West II, will start in Xinjiang. Within Xinjiang, West III may have eight compressor stations and will run parallel to West II.

　　Why the parallel pipelines?

　　The reason why part of West III runs parallel to West II is mainly due to the consideration of CNPC and other relevant parties for easier management of the natural gas pipeline.

　　For example, at the Khorgos station of West II, dozens of employees are responsible for the operation and maintenance of the pipeline's electrical and mechanical facilities. Once West III is completed, the same staff can manage it.

　　West II traverses various landforms such as deserts, gobi, hills, mountains, and swamps. Parts of the pipeline are located in remote and harsh environments, making construction extremely challenging. Given the current constraints on land resources, transportation, and construction conditions in China, the design, construction, supervision, and maintenance of natural gas pipelines require significant manpower and material resources. Therefore, if West III runs parallel to West II, the overall investment cost and safety risks will be reduced.

　　According to CNPC, some of the natural gas from West III will be directly delivered to the West I and West II pipelines through "connecting lines." The designed annual transmission capacity of West III is approximately 30 billion cubic meters.

　　There are rumors that West III may be divided into a western section (from Khorgos, Xinjiang to Zhongwei, Ningxia) and an eastern section (from Zhongwei, Ningxia to Fujian Province), involving multiple provinces and municipalities including Xinjiang, Gansu, Ningxia, Shaanxi, Henan, Hubei, Hunan, and Fujian. However, this has not been confirmed by CNPC. A CNPC management official revealed that the main line of West III may cover a total of ten provinces or autonomous regions.

　　The commissioning of West III will likely alleviate the natural gas demand in several provinces and municipalities. In 2010, China's natural gas consumption reached 110 billion cubic meters, and domestic production reached 95 billion cubic meters. Experts predict that domestic natural gas consumption will continue to grow to 130 billion cubic meters this year, with a "supply gap of possibly 20% to 30%." A CNPC insider stated.

　　The construction and operation of West III may also accelerate natural gas price reform in China. Currently, China has two pipelines, West II and West III, with gas sources from Central Asia. The management of China Petroleum's Western Pipeline Company points out that there is a significant price difference between domestic and international natural gas prices. China's current natural gas ex-factory price is approximately 1.18 RMB/cubic meter, with lower prices in Xinjiang, a domestic gas source.

　　Central Asian natural gas is linked to crude oil and other products, and adjustments are made quarterly or semi-annually. Assuming crude oil is at $60/barrel, the price of imported natural gas to Khorgos is 2.15 RMB/cubic meter. Adding transportation costs, based on current oil prices, the price difference is 1.7 RMB/cubic meter. Since the commissioning of West II, China Petroleum has imported 11.4 billion cubic meters of natural gas from Central Asia, resulting in losses exceeding tens of billions of RMB. If West III opens, it will supplement domestic natural gas supply and promote domestic natural gas price adjustments, but it will also exacerbate China Petroleum's losses from importing Central Asian natural gas.

keyword： Natural gas,Pipeline

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