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Fuel Bills Set To Fall

Bonnie Chen and Benjamin Scent – Friday, August 29, 2008 – Topix

Cheaper electricity bills and cleaner air may be on the way under a deal to boost the amount of power the mainland pumps into Hong Kong’s power grid.

Under an agreement, Beijing has promised to provide ongoing supplies of nuclear-generated electricity and an extra source of natural gas for at least the next 20 years.

Hong Kong officials said a sustained supply of clean energy from the mainland will greatly reduce the need of CLP Power to build a liquefied natural gas terminal on the Soko Islands.

CLP welcomed the deal but said it did not deal fully with expected gas shortages, adding that planning for the terminal is at an advanced stage.

Chief Executive Donald Tsang Yam-kuen and the National Development and Reform Commission and Administrator of the National Energy Administration Zhang Guobao signed a memorandum of understanding in Hong Kong yesterday.

“A stable supply of clean energy will benefit our environment and can relieve the pressure for electricity tariff increases,” Tsang said

Beijing has agreed to supply nuclear-generated power to Hong Kong, at no less than the current level, for the next 20 years.

In addition, China National Offshore Oil Corporation will supply natural gas over the same period. A feasibility study will also be carried out to look at supplying natural gas to Hong Kong via the Second West-East Natural Gas Pipeline while an LNG terminal on the mainland will be built in Shenzhen. CLP claims the current supply of natural gas from CNOOC is running out.

But a government source said CNOOC will look for natural gas from nearby areas to guarantee supply. PetroChina has signed an agreement with Turkmenistan from where natural gas will be supplied to the mainland – even as far as Shenzhen, the source added.

PetroChina also plans to build an LNG terminal in Da Chan Bay in Shenzhen in 2011, which is only 10 kilometers north of Hong Kong. This would require CLP to put down only 4 kilometers of pipeline.

The source said PetroChina would allow CLP and Hongkong Electric to jointly build another LNG terminal in any other part of Shenzhen.

The new scheme of control agreement for the two electric companies becomes effective in October and the government has been considering the electricity tariffs based on costs and future investment.

The government source said CLP, which has total assets of HK$78 billion, planned to invest HK$10 billion to build the Soko Islands terminal.

Given the new rate of return is 9.99 percent, CLP will invest HK$1 billion less a year, the source said.

Environment secretary Edward Yau Tang-wah said yesterday currently 60 percent of electricity in Hong Kong is generated by coal, 20 percent by natural gas and 20 percent by nuclear.

He said the deal would improve air quality.

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