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September, 2008:

Gas Plan For Sokos Ditched By CLP Firm Looks To Invest In Mainland LNG Plant

Sep 12th, 2008
by AdminCTA.
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Denise Tsang, SCMP – Sep 12, 2008

CLP Power (SEHK: 0002) has abandoned its controversial HK$10 billion plan to build a liquefied natural gas plant on the Soko Islands off Lantau.

The power company will instead look to invest in an LNG processing plant on the mainland.

“The Sokos project is stopped,” CLP’s commercial director Richard Lancaster told the South China Morning Post (SEHK: 0583, announcements, news) yesterday.

To ensure a secure supply of the clean fuel, CLP wanted to invest in either a regasification plant planned by PetroChina (SEHK: 0857, announcements, news) in Dachen Bay, Shekou , or one planned by China National Offshore Oil Corp (CNOOC (SEHK: 0883)) in Zhuhai , Mr Lancaster said.

It would also negotiate on sourcing gas from CNOOC’s gas fields in the South China Sea and from PetroChina’s planned 4,800km pipeline from Turkmenistan via Kazakhstan to Shenzhen, he said.

CLP had said the LNG project – which involved building a storage and regasification plant on South Soko Island and a pipeline to carry the fuel to the Black Point power station at Tuen Mun – was needed because reserves at CNOOC’s Yacheng gas field, off Hainan , were far less than expected and would run out soon after 2011 at the current usage rate of 2.5 billion cubic metres a year.

Opponents challenged the plan over fears it would damage an environmentally sensitive marine area and lead to higher electricity bills.

The fate of the project was thrown into doubt when Hong Kong and Beijing struck an energy pact last month to guarantee supply to the city for another 20 years, with CNOOC saying that with further drilling, Yacheng, could supply at least 2 billion cubic metres a year.

“We concur with the [Hong Kong] government view that [the LNG plant] is not needed after a memorandum of understanding on energy supply to Hong Kong was signed,” Mr Lancaster said.

The accord, which includes nuclear power supply, ensures the availability of cleaner fuel for electricity generation – and better air quality – and may reduce pressure to raise power tariffs.

Green groups last night hailed the CLP decision.

Angus Wong Chun-yin, of Friends of the Earth, said: “Although using natural gas is good for the environment, building a liquefied natural gas plant on the Soko Islands could have harmed the environment more.”

He said the project would certainly have destroyed an important habitat of the Chinese white dolphin.

But Mr Wong said more needed to be done to switch to clean fuel.

“Dropping the Soko Islands project should not be the end of the story. The Hong Kong government should press harder to require power companies to use more natural gas to generate power.”

Natural gas and nuclear power each account for about 20 per cent of CLP’s fuel mix, with coal making up 60 per cent.

A government source described CLP’s decision as “realistic and clever”. The source said the Environment Bureau would facilitate talks between CLP and the mainland authorities and companies concerned.

Mr Lancaster said CLP would go ahead with a 20-year gas purchase agreement with British-based BG. A preliminary agreement for the gas, originally intended to supply the Sokos plant, was signed in June.

The BG deal would fill a supply shortfall, he said. The Black Power plant could consume 3.4 billion cubic metres of gas per year, while CNOOC would supply 2 billion cubic metres and PetroChina 1 billion cubic metres annually by 2013.

Expert Backs Soko LNG Terminal Plan

Sep 9th, 2008
by AdminCTA.
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Timothy Chui, SCMP – Tuesday, September 09, 2008

The territory’s power supply will be more secure if a planned liquefied natural gas terminal on the Sokos Islands goes ahead, according to an energy expert.

“We can have complete control on how much to buy and how much to pay,” director of Hong Kong Baptist University’s Energy Studies Centre Larry Chow Chuen-ho said.

Chief Executive Donald Tsang Yam-kuen signed a memorandum of understanding with Zhang Guobao, the head of the mainland’s National Energy Administration, late last month to extend the supply of nuclear and natural gas energy to the territory for two decades.

An LNG terminal would also insulate Hong Kong from supply disruptions from the mainland, Chow told Sunday’s City Forum.

Chow said CLP in 2003 used more coal in power generation to make up for a shortfall in LNG, as China National Offshore Oil Corp was not able to sell as much that year. However, Chow was confident the mainland would keep its end of the bargain.

Pointing out that the supply payment contract between Hong Kong and CNOOC’s contract was based on an agreement made in the early 1990s, he speculated that the corporation was not happy to be locked in at lower rates.

Secretary for the Environment Edward Yau Tang-wah said the power deal “diminished” the need to build a local LNG terminal. He hinted the likelihood the government would approve the late-stage plan was “much reduced.”

Yau said a 16-kilometer pipeline from Shenzhen would be much cheaper than CLP’s HK$10 billion proposal for a 38km pipeline to South Soko Island.

Beijing Names Polluting Firms

Sep 6th, 2008
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Beijing allots 42b yuan for green projects, names polluting firms

Eric Ng – SCMP – Updated on Sep 06, 2008

Beijing has earmarked 41.8 billion yuan (HK$47.8 billion) to fund energy conservation and pollution reduction projects, stepping up a drive to boost its environmental credentials.

Officials also named and shamed 74 companies that had failed to meet energy conservation targets handed down to nearly 1,000 firms in 2006.

Beijing also reiterated its long-term goal of raising domestic energy prices to international levels and using tax incentives to meet its goal of cutting energy consumption per unit of GDP by 20 per cent in the five years to 2010.

“To realise our energy conservation and pollution reduction targets, the State Council and related departments have recently come up with a string of measures to strengthen the initiatives’ implementation,” the National Development and Reform Commission (NDRC) said.

Beijing has set aside 14.8 billion yuan from government bond issuance and revenue as well as 27 billion yuan of special-purpose funds to spur the adoption of energy conservation and green practices.

The goal is to add this year, annual energy savings equivalent to 35 million tonnes of coal consumption. The country consumed 2.7 billion tonnes of coal last year. It has already closed scores of small and inefficient power, cement, steel and aluminium plants in the past few years.

Of 953 firms being appraised, 879 or 92.2 per cent have met or exceeded the annual targets set for last year while 74 or 7.8 per cent have not. The other 45 were not assessed.

Most of those failing to meet targets are in the power, steel, non-ferrous metals and chemicals sectors.

They include Datang International Power Generation’s Zhang Jiakou power plant in Hebei, China Petroleum & Chemical’s Baling unit in Hunan, Shenhua Group’s coal unit in Ningxia Hui autonomous region and Yanchang Oil (Group) in Shaanxi.

Together the 953 firms saved energy equivalent to 38.17 million tonnes of coal last year, during which they invested some 50 billion yuan into energy conservation technology and infrastructure upgrades.

The State Council has required that energy conservation accomplishment become a key part of state-owned enterprises bosses’ annual performance assessment.

“For those [firms] that failed to meet targets, they must come up with a rectification proposal with a time-line within a month,” the NDRC said, adding they would be barred from enjoying government support and their new energy-intensive investment projects and industrial land-use applications would not be approved.

The NDRC said it would “actively and carefully” implement reform of energy prices so they would be determined by market forces and reflective of resource scarcity.

Also on the cards are the reform of resources tax and imposition of pollution and fuel consumption taxes.

Firms with energy saving and pollution-cutting projects will be eligible for profit and value-added tax cuts.

Baby Steps Towards Greener Economies

Sep 6th, 2008
by AdminCTA.
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Michael Richardson – SCMP – Updated on Sep 06, 2008

China’s top legislature has just approved a new law designed to put production in what is now one of the world’s four-biggest economies on a more sustainable foundation. When the law comes into force in January, it will add weight to government efforts to get industry to use energy and other resources less wastefully and curb emissions that harm people’s health and the environment.

Dubbed the “circular” economy by officials, this is China’s latest effort to go green by raising efficiency and harnessing alternative energy to reduce reliance on coal, oil and gas. China pays a heavy price for waste and inefficiency in its economy. Ma Kai , head of the National Development and Reform Commission, said last year that, in 2006, China used 15 per cent of the world’s energy to produce just 5.5 per cent of global gross domestic product. “The overall growth of the Chinese economy is inspiring, but one of the worries is that we have paid too dear an environmental and resources price for such growth,” he said.

Enacting the new law will be the easy part. Enforcing it at all levels of the bureaucracy will be much more difficult, as provincial and local governments compete to attract and retain industries, even if they are dirty or only semi-clean.

Beijing, like the Bush administration in the United States, is wary of committing itself to a binding national cap on its greenhouse gas emissions because it knows that could undermine its competitiveness. This will happen unless there are agreed global rules, universally and equitably applied to all sectors of all major economies.

To see the buffeting facing governments and economies in the brave new world of environmental correctness, Beijing need look no further than Australia, one of China’s leading resource suppliers. Australia is the fourth-largest greenhouse gas emitter in the world on a per capita basis, mainly because, like China, it relies heavily on coal to generate electricity. However, Australia emits five times more per person than China. The government, under Prime Minister Kevin Rudd, plans to launch a national cap-and-trade scheme by 2010 that will put a price on emissions and then oblige companies to buy permits to cover them.

The plan, which is still under negotiation with industry, has triggered a raging debate over how costs are to be apportioned among companies, consumers and the government. Mr Rudd said on Monday that the scheme would “help drive our long-term transformation to a low-carbon economy”. But industry has warned it could drive large emitters offshore or out of business, while sharply raising prices of electricity and other products for consumers.

The government has promised compensation for consumers and help for businesses facing higher energy costs. But, in doing so, it has distorted the “polluter pays” principle in an attempt to ease the burden on firms most likely to lose competitive advantage at home or abroad. Energy-guzzling companies with more than 2,000 tonnes of emissions per A$1,000 (HK$6,570) in revenue would pay for only 10 per cent of their emissions, while cleaner companies producing 1,500 to 2,000 tonnes would pay for 40 per cent of their emissions.

Wherever emissions-trading schemes have been mooted, they are proving controversial. The European Union has promised to cut emissions by 20 per cent by 2020, compared to 1990 levels. It has said it would deepen the cut to 30 per cent if other big economies like China and the US joined the global reduction effort.

However, some members of the European Parliament are now having second thoughts in the face of industry protests. They want a full impact assessment before cutting beyond 20 per cent. No wonder, then, that China is cautious. It does not want to cut its emissions to spite its economy.

Michael Richardson is an energy and security specialist at the Institute of Southeast Asian Studies in Singapore. mriht@pacific.net.sg

Will HK’s Gas Pipeline Really Clean Our Skies?

Sep 5th, 2008
by AdminCTA.
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SCMP – Sep 05, 2008

It is welcome news that Hong Kong will be getting gas from a new mainland pipeline.

However, the reported volume of about 1 billion cubic metres per year (“More gas for HK in deal with mainland”, August 29) is less than 40 per cent of what CLP Power (SEHK: 0002) is getting from the Yacheng field near Hainan . If CLP is right about Yacheng’s continuing decline, gas supplies to Hong Kong will actually fall over time even with this new deal. In contrast, the proposed liquefied natural gas (LNG) terminal would provide something like four times the reported amount of gas from the new pipeline deal.

To meet clean-air targets Hong Kong needs natural gas to replace much of the coal it uses. Natural gas is a versatile fuel used around the world for residential and commercial energy, transport and generating electric power. The more gas we have, the more options we have to reduce pollution. Considering this, the new gas deal should not necessarily rule out a Hong Kong LNG terminal.

We urge the government to provide specific information about the amount of gas Hong Kong will receive under the new pipeline agreement and clearly state whether the amount will be adequate to allow us to substantially reduce (and eventually eliminate) dependence on coal for power generation.

Bill Barron, visiting scholar, Alexis Lau, director, environmental central facility, Institute for the Environment, Hong Kong University of Science and Technology

Will HK’s Gas Pipeline Really Clean Our Skies?

Sep 5th, 2008
by AdminCTA.
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Updated on Sep 05, 2008 – SCMP

It is welcome news that Hong Kong will be getting gas from a new mainland pipeline.

However, the reported volume of about 1 billion cubic metres per year (“More gas for HK in deal with mainland”, August 29) is less than 40 per cent of what CLP Power is getting from the Yacheng field near Hainan . If CLP is right about Yacheng’s continuing decline, gas supplies to Hong Kong will actually fall over time even with this new deal. In contrast, the proposed liquefied natural gas (LNG) terminal would provide something like four times the reported amount of gas from the new pipeline deal.

To meet clean-air targets Hong Kong needs natural gas to replace much of the coal it uses. Natural gas is a versatile fuel used around the world for residential and commercial energy, transport and generating electric power. The more gas we have, the more options we have to reduce pollution. Considering this, the new gas deal should not necessarily rule out a Hong Kong LNG terminal.

We urge the government to provide specific information about the amount of gas Hong Kong will receive under the new pipeline agreement and clearly state whether the amount will be adequate to allow us to substantially reduce (and eventually eliminate) dependence on coal for power generation.

Bill Barron, visiting scholar, Alexis Lau, director, environmental central facility, Institute for the Environment, Hong Kong University of Science and Technology

Time For Answers Over Gas Deal

Sep 3rd, 2008
by AdminCTA.
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Michael Chugani, SCMP – Sep 03, 2008

Something stinks about this whole business of the government signing a gas deal with the mainland so CLP Power (SEHK: 0002) won’t have to build its eyesore terminal on South Soko Island. And the stink is coming from both sides. There are so many unanswered questions over whether or not to build the terminal that it makes you wonder what the big boys in government and CLP Power are up to, and if the people have become pawns.

For starters, why did CLP insist the only way to ensure gas supplies was to build the terminal, which would have meant higher electricity bills for consumers? Was CLP trying to fatten profits? The government has now proved it is possible to buy cheap gas from the mainland using a much shorter, less expensive pipeline. What does that say about CLP’s claim that it had to buy from abroad using a much longer, less environmentally friendly pipeline? To justify its Sokos terminal, CLP insisted that gas from the Yacheng field off Hainan was running out. But the government has secured a 20-year supply from Yacheng. Was CLP trying to dupe us?

Why did the government keep the mainland deal secret all this time and then suddenly spring it on us after it was signed and sealed, yet all the while making us believe CLP’s Sokos proposal was still alive and kicking? Did CLP know about the government’s talks with the mainland? If yes, why did it still waste time chasing the Sokos plan? If no, why did the government sit back and watch CLP chase the plan, knowing it would be dead on arrival?

All these questions need answers simply because the government continues to give CLP a monopoly which allows the company to maximise profits by building more plants.

CLP Upbeat On UK Deal In Spite Of Beijing Move

Sep 1st, 2008
by AdminCTA.
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The Financial Times Limited By Tom Mitchell and Robin Kwong in Hong Kong – September 1 2008

China Light and Power, Hong Kong’s largest energy company, hopes shortly to finalise a provisional natural gas contract with the UK’s BG Group worth billions of dollars in spite of a government agreement that appeared to redirect the lucrative supply arrangement to two Chinese state-controlled oil and gas companies.

In a bilateral memorandum of understanding announced last week by the Hong Kong and Chinese governments, Beijing said it would support the 20-year renewal of existing supply arrangements from China National Offshore Oil Corporation’s gas fields in the South China Sea.

The two governments also agreed to study the feasibility of supplying Hong Kong from China’s second West-East Gas Pipeline, which is being built by PetroChina. Unlike PetroChina’s domestic business, any sale of its gas to Hong Kong would not be subject to government price controls.

The surprise agreement appeared to trump a provisional supply arrangement signed in June, under which BG Group agreed to provide CLP with one million tons of LNG a year from 2013 to 2033. CLP did not reveal how much it would pay BG Group under the two companies’ 20-year “heads of agreement”, but such long-term gas contracts are typically worth billions of US dollars.

However, CLP told the Financial Times: “Even with the gas supplies cited in the MoU, significant quantities of LNG will still be needed to meet our full requirements for natural gas … We will continue working to finalise the sales and purchase agreement [with BG Group] in 2008.”

BG Group declined to comment.

CLP has long argued that it needs new gas supplies because reserves at Yacheng, a CNOOC-controlled field in the South China Sea, are running low. To import new supplies from BG Group, CLP has proposed building an LNG receiving terminal in Hong Kong. The project, which is bitterly opposed by environmental groups, has yet to receive final government approvals.

Speaking after last week’s MoU, senior Hong Kong government officials suggested that CLP would no longer need to build a receiving terminal in Hong Kong. Hong Kong’s agreement with the Chinese government instead proposes the construction of an LNG receiving terminal across the border, in nearby Shenzhen.

But the Hong Kong government did say that any new supply agreements between CLP and Chinese energy companies would have to be “worked out on commercial principles between the relevant enterprises on both sides”.

“The MoU introduces a new possible location for a LNG receiving terminal,” CLP’s spokesperson added. “We will study this alternative and consider the feasibility of using it to supply [our] power station by 2013.”

CLP’s Hong Kong-traded shares fell sharply in response to the bilateral MoU, dropping 3.57 per cent on Friday to HK$63.50, because of fears that the company would be forced to cancel its plans to build an LNG terminal in the territory.

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