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China’s Coal-To-Gas Transition Sputters

natural gas

China’s ambitious program to shift from coal to gas is showing more signs of stuttering as the province of Hebei this week stopped a program that envisaged the conversion of many coal-fired boilers to gas. The program has been shelved until 2020, when additional gas import capacity from Russia will be ready.

This is the latest indication that Beijing may have rushed into this shift, neglecting the fact that such a large-scale transition needs adequate gas distribution capacity. Last month, millions of people as well as some businesses in the northern parts of the country suffered electricity and heating shortages as Beijing ordered several million households plus a number of industrial businesses to switch from coal to gas for heating and electricity in an attempt to reduce pollution.

Then earlier this month, four regional utilities warned in a letter to the government that there will be more shortages if Beijing doesn’t take care to increase the supply of coal and put a lid on fast-rising prices. “If the coal inventories don’t rise to a reasonable level by Spring Festival, then it will be really difficult to deal with the drop in temperatures in some key regions and in the winter heating regions,” the companies said.

Hebei has been at the forefront of the transition program because it is around Beijing and because its coal use was much higher than the national average, at 86.6 percent in 2015 versus a national average of 63 percent. Last year, the local authorities converted more than 2.5 million households to gas and electricity heating from coal as part of efforts to reduce its contribution to China’s pollution problem.

Yet, like elsewhere in China, Hebei has its problems with insufficient gas distribution infrastructure, which in December forced the government to allow the use of coal for heating purposes. According to gas suppliers, it was lack of communication between the government and the industry that led to these inadequacies as it led the government to underestimate demand.

By Irina Slav for Oilprice.com

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