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HK Gas Terminal On Hold In Green Move

Robin Kwong in Hong Kong, The Financial Times Limited – August 28 2008

The Hong Kong government has backed away from approving a controversial natural gas terminal in an ecologically sensitive area, in what is seen as its first serious attempt to tackle air pollution in the territory in recent years.

China Light and Power, Hong Kong’s biggest energy company, has long argued that it needed to build an HK$8bn ($1bn) liquid natural gas receiving terminal to ensure a stable future gas supply for the territory.

Having more natural gas was also a prerequisite for improving Hong Kong’s air quality, according to CLP, which said it now had to burn more coal to conserve its dwindling gas supplies.

However, environmental activists claim that the terminal, which CLP proposed to build on two small islands on the edge of Hong Kong’s territorial waters, will endanger marine life, particularly the rare pink dolphins and finless porpoises that are Hong Kong’s only indigenous marine mammals.

Edward Yau, environment secretary, said on Thursday that the need for the terminal was greatly reduced after Hong Kong signed a series of energy deals with Beijing that will ensure a stable supply of gas to the territory for the next 20 years.

Under the agreement, the state-controlled China National Offshore Oil Corporation will renew its supply agreement to Hong Kong for another 20 years, and Petro­china will still study the feasibility of supplying gas to Hong Kong from central Asia via pipeline as well as an LNG terminal that Petro­china is planning to build in neighbouring Shenzhen economic zone.

A senior government official, who preferred to remain anonymous, said the government expected that, with this agreement in place, CLP would increase its use of natural gas from a third of its fuel mix to half, thus improving Hong Kong’s air quality. CLP is the biggest polluter within Hong Kong, though the territory also suffers from pollution generated by factories across the border.

Andrew Brandler, chief executive of CLP, said he welcomed the agreement, but the new supply will only “partly fill the gas shortage being faced by us”.

“Imports of LNG will still be needed to meet our full requirements as our need for clean natural gas continues to grow,” Mr Brandler said.

While the new gas supply is still subject to CLP reaching a commercial agreement with CNOOC and Petrochina, the senior official said it was “an obvious choice” over CLP building its own terminal within Hong Kong.

The lack of government support for a Hong Kong terminal also calls into question a 20-year gas supply deal that CLP had initially agreed on with BG Group, the UK gas company, in June. CLP declined to comment on the impact the latest developments would have for the BG deal.

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