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More Gas For HK In Deal With Mainland

20-year energy supply guaranteed

Ng Kang-chung, Denise Tsang and Agnes Lam – SCMP – Updated on Aug 29, 2008

Hong Kong and the mainland signed a new energy deal yesterday that guarantees continued supplies of natural gas and nuclear power for 20 years and holds out the prospect of cleaner air and cheaper electricity.

The deal, which took analysts by surprise, also appeared to put paid to plans by CLP Power for a controversial liquefied natural gas terminal on the Soko Islands, off Lantau.

Under the deal with the National Development and Reform Commission, state-owned gas supplier China National Offshore Oil Corporation will continue to supply Hong Kong with natural gas for a further 20 years.

The city will also receive gas from the nation’s second west-east natural gas pipeline being built to transport gas imported from Central Asia to the Pearl and Yangtze river delta regions.

The deal marks the first time Hong Kong has been included in the nation’s energy supply blueprint.

The 4,800km pipeline is expected to reach Shenzhen in about five years. Hong Kong officials estimated the city would receive about 1 billion cubic metres of gas a year from this source.

The agreement opens up opportunities for Hong Kong companies to invest in natural gas developments in Guangdong.

Under the deal, the China Guangdong Nuclear Power Holding Company will renew its supply agreement with Hong Kong for a further 20 years.

Speaking at the signing ceremony yesterday, Chief Executive Donald Tsang Yam-kuen described the agreement as “extremely good news” for Hong Kong’s power supply and environment.

National Development and Reform Commission vice-chairman Zhang Guobao said: “A stable energy supply to Hong Kong will boost Hong Kong’s prosperity.”

Secretary for the Environment Edward Yau Tang-wah said the main purpose was to ensure a long-term, stable energy supply.

What is more important is that we do not need to build LNG terminals in Hong Kong any more. So, there will be no more pressure for raising tariffs as a result of investment,” he said.

CLP’s HK$10 billion Soko project had been expected to inflate by an estimated 13 per cent the value of the power company’s net assets, on which electricity tariff rises are based.

The agreement puts a big question mark over a preliminary 20-year deal CLP made with British-based liquefied natural gas supplier BG two months ago for the project.

CLP said it would study the implications for the project, which “is already at an advanced stage”, and study new options. The terminal was designed to replace dwindling supply from Hainan’s Yacheng gas field in 2013.

A government spokesman last night declined to say if the new agreement would kill the project, but added: “The need for that project is greatly reduced.”

Hongkong Electric welcomed the agreement. Green groups also hailed it, saying they believed it would bring better air quality to the city.

Carbon dioxide emissions can be reduced by 50 per cent when liquefied natural gas is used instead of burning coal to generate power. And sulfur dioxide – a major source of air pollution here – can be cut by more than 90 per cent, according to environmental officials.

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