Thirteen ministries push for natural gas utilization, aiming to advance pilot projects in the coal-to-gas industry

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Thirteen Ministries Push for Natural Gas Utilization, Aim to Advance Demonstration Projects for Coal-to-Gas Production Author/Source: Date: 2017-07-07 Clicks: 213 On July 4, the website of the National Development and Reform Commission showed that 13 departments, including the NDRC, the Ministry of Science and Technology, the Ministry of Industry and Information Technology, the Ministry of Finance, the Ministry of Environmental Protection, and the National Energy Administration, had formulated the \"Opinions on Accelerating the Utilization of Natural Gas\" (hereinafter referred to as the \"Opinions\"). The Opinions suggest that in the coming period, the supply and demand balance for natural gas will remain generally favorable, with a resource base that supports its large-scale utilization. The Guidelines set clear development goals, requiring that by 2020, natural gas should account for around 10% of the total primary energy consumption, with underground gas storage facilities holding an effective storage capacity of 14.8 billion cubic meters. By 2030, efforts will be made to raise the share of natural gas in primary energy consumption to around 15%, with underground gas storage facilities having an effective storage capacity of over 35 billion cubic meters. The Guidelines specify the need to further advance the development of demonstration projects in the coal-to-gas industry, and to support the construction of transmission pipelines for coalbed methane, shale gas, and coal-derived natural gas, as well as ensuring that gas sources can be connected locally. Previously, the **‘13th Five-Year Plan for Demonstrating Advanced Coal Processing Industries’ issued by the Energy Bureau stated that by 2020, the production capacity for coal-to-natural gas would be 17 billion cubic meters per year. It is specified to establish demonstration projects for coal-to-natural gas production in Su New Energy and Feng, Beikong Ordos, Shanxi Datong, Xinjiang Yili, and Anhui Energy Huainan, with each undertaking corresponding demonstration tasks. Opinions on Accelerating the Utilization of Natural Gas In order to accelerate the use of natural gas, increase its share in China’s primary energy consumption structure, advance the revolution in energy consumption and rural lifestyles in a steady manner, effectively control air pollution, and actively address climate change, the following opinions are put forward. 　　I. General Requirements (1) Guiding Principles Fully implement the spirit of the Party’s * and the third, fourth, fifth, and sixth plenary sessions of the 18th Central Committee, as well as the important speeches in the **** series. Firmly establish the development concepts of innovation, coordination, sustainability, openness, and sharing. Adhere to the energy development strategy of “four revolutions and one cooperation,” give full play to the decisive role of the market in resource allocation, and focus on clean fuel substitution and the development of new markets. Accelerate the large-scale, efficient, and scientific use of natural gas in areas such as urban gas supply, industrial fuel use, gas-powered power generation, and transportation. Promote coordinated development across all stages of the industry, thereby increasing the share of natural gas in primary energy consumption. 　　(II) Basic Principles Planning guidance, policy-driven. Fully leverage the guiding role of planning to define the goals, arrangements, and safeguard measures for natural gas utilization. Effectively implement the action plan for air pollution control and restrict the use of highly polluting fuels. Advance clean heating in the northern regions and accelerate the increase in the share of clean heating. Fully leverage the driving role of environmental protection, industrial, financial, fiscal, and pricing policies in expanding the utilization of natural gas. 　　Reform and innovation, market operation. We will further advance the reform of the natural gas system, strive to remove institutional and mechanismal barriers hindering the healthy development of the natural gas industry, and give full play to the decisive role of the market in the allocation of natural gas resources. Competition in relevant sectors should be gradually unleashed, various types of capital should be encouraged to invest in the construction and utilization of natural gas infrastructure, and the marketization of natural gas prices should be accelerated. 　　Advance comprehensively and focus on key areas. Priority should be given to clean heating in winter in northern regions, the conversion from coal to natural gas in industrial and residential sectors, peak-load natural gas power generation, distributed natural gas systems, and natural gas-powered vehicles and ships. Adapt measures to local conditions, use pilot projects as a model, actively promote such trials, and gradually expand them after accumulating experience. 　　Industrial coordination and healthy development. Emphasis should be placed on coordinating the upstream, midstream, and downstream sectors of the natural gas industry chain, by establishing a coordinated industrial chain that covers all stages from gas field development, international trade, reception at receiving stations, pipeline transportation, storage for peak demand management, spot and futures trading, to final consumption. Market-based approaches should be used to ensure a balance between supply and demand as well as to handle emergency situations related to peak demand. Every link must strive to reduce costs to ensure that end-users benefit and to enhance the competitiveness of natural gas. 　　(III) Overall objectives: Gradually develop natural gas to become one of the key energy sources in China’s modern clean energy system. By 2020, it is aimed to achieve a share of around 10% for natural gas in the structure of primary energy consumption, with underground gas storage facilities holding an effective storage capacity of 14.8 billion cubic meters. By 2030, efforts will be made to raise the share of natural gas in primary energy consumption to around 15%, with underground gas storage facilities having an effective storage capacity of over 35 billion cubic meters. 　　II. Key Tasks (1) Implementing urban gas projects Promoting clean heating in northern regions during winter. Guided by the principle of giving priority to enterprises, ensuring active promotion, and keeping costs affordable for residents, we should opt for gas where appropriate and electricity where suitable, making full use of clean energy to rapidly increase the proportion of clean heating. Focusing on the key cities (2+26) within the air pollution transmission pathways in the Beijing-Tianjin-Hebei region and its surrounding areas, efforts will be made to ensure that in areas where conditions permit, natural gas, electricity, waste heat, and shallow geothermal energy are used as alternatives to burning coal for heating within 5 years. With the assurance of a gas supply, active encouragement is given to the development of gas-powered air conditioners, individual heating systems, and distributed natural gas energy systems. 　　Rapidly improve the gas supply level for urban residents. In line with the development of new-type urbanization, the public gas service system in cities and towns should be improved. Support should be provided for the installation of gas facilities in urban areas, new districts, newly built residential complexes, and public service institutions. Efforts should also be made to upgrade gas facilities in urban villages, areas at the edge of cities and towns, and slum areas, as well as to replace coal with gas in these areas. Accelerate the renovation of old gas pipelines. Support the implementation of pilot projects for household natural gas heating in areas in the south that meet the necessary conditions. 　　Bridge the ‘last mile’ in natural gas utilization. Pilot projects to bring natural gas to rural areas are being carried out, with encouragement for multiple stakeholders to participate. Depending on the circumstances, pipelines or other storage methods such as compressed natural gas (CNG), liquefied natural gas (LNG), and liquefied petroleum gas (LPG) stations are used to improve access to natural gas in remote and rural regions. In conjunction with the construction of new rural areas, guide rural residents to use natural gas according to local conditions; in areas where conditions permit, vigorously develop biomethane (biogas). 　　(II) Implementation of natural gas power generation projects Vigorously develop distributed natural gas energy systems. Demonstration projects for distributed natural gas energy systems are to be promoted in energy-demanding centers in large and medium-sized cities, industrial and logistics parks, tourism service areas, commercial centers, transportation hubs, hospitals, schools, etc., with the aim of exploring new models such as Internet+ and intelligent energy microgrids to achieve coordinated supply of multiple energy sources and comprehensive hierarchical utilization of energy. Pilot projects for distributed energy systems using LNG as a fuel source will be carried out in areas not covered by the pipeline network. 　　Encourage the development of natural gas peak-shaving power plants. Encourage the construction of natural gas peak-shaving power plants in areas with high electricity demand, as well as the use of existing facilities such as land, plant buildings, and transmission lines at existing coal-fired power plants, in order to enhance the level of electricity supply security in these areas. Encourage the construction of gas-based peak-shaving power plants alongside wind and solar power generation facilities, and carry out demonstration projects for integrated use of renewable energy and natural gas in order to improve the stability of power output and reduce the rates of waste wind and solar energy. 　　Develop natural gas combined heat and power in an orderly manner. In key regions for air pollution prevention and control such as the Beijing-Tianjin-Hebei region and its surroundings, the Yangtze River Delta, the Pearl River Delta, and Northeast China, it is appropriate to develop combined heat and power gas-fired power plants in large development zones, industrial clusters, and industrial parks that have stable heat and electricity loads. 　　(III) Implement industrial fuel upgrading projects. Industrial enterprises shall, in accordance with the elimination standards and time limits specified in the air pollution prevention and control action plans at various levels, focus on replacing coal and oil-based fuels with natural gas in industrial boilers and furnaces with a heating capacity of 20 steam tons or less located in \"high-pollution fuel prohibition zones\". For newly built, renovated, or expanded industrial boilers and furnaces, the use of coal, heavy oil, petroleum coke, and artificial gas as fuels must be strictly controlled. 　　Encourage the substitution for and utilization of natural gas in key industrial sectors such as glass, ceramics, building materials, machinery and electronics, and light textiles. In development zones, industrial clusters, industrial parks, and other areas where industrial heat loads are relatively concentrated, the construction and renovation of centralized natural gas heating facilities is encouraged. Users should be allowed to make market-based choices regarding pipeline gas, CNG, and LNG as energy sources. The planning, construction, and operation of related facilities must comply with laws, regulations, and technical standards. 　　(IV) Implement the project for upgrading transportation fuels – Accelerate the development of natural gas-powered vehicles and ships. Increase the share of natural gas in public transportation, freight logistics, and ship fuel. Natural gas vehicles are primarily developed for use in buses and taxis, long-distance trucks, as well as for vehicles used in sanitation work, at industrial sites, ports, tourist attractions, and for shuttle services. Accelerate the adoption of heavy-duty natural gas (LNG) vehicles to replace heavy-duty diesel vehicles in key areas focused on air pollution control, such as the Beijing-Tianjin-Hebei region. In the shipbuilding sector, emphasis is placed on developing inland and coastal transport and operation vessels powered by natural gas, equipped with corresponding after-treatment systems. 　　Accelerate the construction of CNG (compressed natural gas) refueling stations. Along highways, national and provincial roads, mining areas, logistics hubs, tourist areas, and road passenger transport centers, the development of CNG filling stations, LNG filling stations, CNG/LNG dual-use stations, stations that combine oil and gas services, and stations that integrate oil, gas, and electricity services is encouraged. Make full use of the planned land within or surrounding existing bus stations to build CNG filling stations, and support gas stations that have the necessary facilities to add CNG filling capabilities. Transport enterprises with the necessary conditions are encouraged to build their own gas refueling stations. Promote the construction of LNG bunkering stations for ships, and expedite the improvement of the layout plan for such stations (berths). The installation of gas filling (note) stations shall comply with relevant laws and regulations as well as engineering and technical specifications. 　　III. Policy Guarantees
(1) Implementing stricter environmental protection policies
Designate and gradually expand the areas where the use of highly polluting fuels is prohibited. Local authorities **should accelerate the process of designating areas where the use of highly polluting fuels is prohibited. In those areas where such bans have already been established, the scope of these restrictions should be gradually expanded in line with the requirements for improving air quality and the availability of clean energy sources such as natural gas, extending from urban areas to the surrounding suburbs. Within the areas where the use of highly polluting fuels is prohibited, such fuels may not be sold or used, and no new facilities for using them may be constructed or expanded. For those facilities that already exist, they must switch to natural gas, electricity, or other clean energy sources within the time limit specified by the city authorities. For key areas for air pollution prevention and control, stricter emission standards shall be established, special emission limits shall be implemented, and the management of pollution discharge permits shall be comprehensively promoted. Energy regulation, quality supervision, industry and commerce administration, environmental protection, and other relevant departments in various regions exercise strict oversight over the production, distribution, and use of coal within areas where the burning of highly polluting fuels is prohibited, in accordance with their respective duties. At the same time, they strengthen supervision over coal usage by industrial enterprises and power generation companies. 　　Strictly control pollution emissions in the transportation sector. Strengthen the prevention and control of pollution from land-based transportation sources and ship emissions, and establish strict standards for pollutant emissions from vehicles as well as requirements to reduce CO2 emissions per unit of transportation volume. In key coastal areas such as the Yangtze River Delta and Pearl River Delta, the relevant requirements for controlling ship pollution emissions are strictly enforced, and efforts are intensified to prevent and control pollution from emissions by inland vessels. In key areas for air pollution prevention and control, monitoring equipment for vehicle emissions has been installed comprehensively. Collaborative management and control efforts have been strengthened, with a focus on screening diesel trucks and gasoline vehicles with high emissions. Vehicles exceeding emission standards are strictly prohibited from operating on roads. 　　Include the transition from coal to clean energy in environmental protection assessments. Establish an evaluation and accountability mechanism for the implementation of environmental protection measures by provinces (autonomous regions and municipalities). Effectively enforce the principle of “equal responsibilities for Party committees and governments” and “dual responsibilities for each post” in environmental protection. Include measures such as switching from coal to natural gas for residential and industrial use in the evaluation criteria to ensure their effective implementation. 　　(II) Improve the natural gas pricing mechanism Deepen reforms to natural gas prices. Advance the market-based reform of gas prices for non-residential users, and further improve the pricing mechanism for residential gas use. Once the diversification of upstream operators and fair access for third parties to infrastructure are achieved, gas sources and sales prices should be liberalized at an appropriate time. All regions should strengthen supervision over the transportation and distribution prices of natural gas pipelines within their provinces, expedite the formulation of regulatory rules, establish and improve cost monitoring systems, promote the disclosure of cost information, and enhance social oversight. 　　Improve the pricing mechanism for natural gas power generation. Improve the price linkage mechanism between gas and electricity; where conditions permit, local authorities can actively adopt measures such as financial subsidies to address the issues related to natural gas-powered power generation prices. As the reform of the power system progresses and the market for power auxiliary services expands further, marketization of natural gas power generation prices should be promoted. Refine and improve the procedures for connecting natural gas distributed energy projects to the grid. 　　(III) Improve the natural gas market system 　　Reduce intermediate steps in gas supply. It is necessary to actively promote reforms in the institutional framework, minimize the intermediate steps in natural gas supply within the province, reduce the number of levels in the supply chain, and effectively lower the costs associated with transmission and distribution at each stage. The main natural gas distribution network is designed to serve specific areas and users; under the pretext of centralized procurement and sales, no additional gas distribution stages should be created to increase the cost of gas supply. Surcharges imposed where there is no substantial investment in pipeline networks or where no transmission and distribution services are provided must be abolished immediately. When approving projects, local authorities must carefully evaluate the construction of natural gas pipeline projects within their provinces. They should exercise strict scrutiny over any pipeline projects that involve unnecessary intermediate steps, and resolutely prevent any instances of “interception-based fee collection” in newly constructed pipelines. 　　Establish a mechanism that allows users to independently choose resources and gas supply paths. Users can independently choose the resource provider and gas supply route, reducing the number of gas supply levels and lowering gas usage costs. Users who independently choose resource providers and gas supply routes must comply with local urban and rural development plans, as well as special plans related to natural gas and gas industry development. Local people’s governments should strengthen overall coordination and provide support. Enterprises shall, in accordance with the provisions of the Regulations on the Administration of Urban Gas, apply for and obtain a gas operation permit before engaging in gas supply operations. Support the orderly establishment and operation of natural gas trading centers, and encourage market-based trading of natural gas. 　　(IV) Improve industrial policies 　Accelerate the formulation, revision, abolition, and interpretation of regulations and standards. Accelerate the elimination and revision of laws, regulations, and regulatory documents that are not suitable for the new circumstances and requirements of reform. Simplify and optimize the administrative approvals related to natural gas utilization, eliminate industry-specific, regional, and operational barriers, and promote fair competition. Accelerate the formulation and revision of standards and regulations related to natural gas metering, the manufacturing of natural gas-powered vehicles and ships, the storage and distribution of LNG on land and in inland waterways, as well as the safety measures and required safety distances for gas filling stations. Study policies regarding inland LNG-powered ships passing through locks, as well as LNG-powered ships crossing the Three Gorges Dam. Initiate the quality upgrade of marine fuel. In conjunction with the pilot projects for individual natural gas heating in southern regions, local standards are developed to steadily raise the energy efficiency requirements for residential buildings. 　　Strengthen the guarantee for land use for natural gas facilities. Provinces (regions, municipalities) should incorporate the planning for natural gas storage and peak-shaving facilities as well as gas filling (refilling) station projects into energy and related industry plans, and ensure coordination with plans for land use and urban-rural development. Enterprises are supported in using existing land in accordance with the law to build the aforementioned projects. Land for natural gas facilities that meets the criteria in the catalog of land allocated free of charge shall be allocated preferentially. The grant of land for natural gas facilities through methods such as transfer or lease is encouraged. Give priority to meeting the land requirements for gas storage and peak-shaving facilities. 　　Implement the carbon emission trading system. We will promote the establishment and continuous improvement of a nationally unified carbon emission trading market. In industries such as power generation, petrochemicals, chemicals, building materials, steel, non-ferrous metals, and papermaking, priority will be given to allocating carbon emission allowances to facilities and enterprises that use natural gas as fuel or raw material. 　　(5) Strengthen financial and investment financing support Improve financial support. Local authorities are encouraged to provide financial support tailored to local conditions, in order to promote the development of projects such as natural gas pipelines, urban gas distribution networks, gas storage and peak-shaving facilities, the conversion from coal to gas, natural gas-powered vehicles and ships, marine LNG refueling stations, natural gas-based peak-shaving power plants, natural gas combined heat and power systems, and distributed natural gas systems. Before December 31, 2017, new LNG-powered ships, or those converted into LNG-powered ships through a complete replacement of their power systems, were eligible to receive relevant special subsidy policies as stipulated. 　　Expand financing channels. It supports local governments, financial institutions, enterprises, etc. in innovating cooperation mechanisms and investment and financing models on the basis of risk prevention, in innovating and flexibly utilizing various financial instruments such as loans, funds, bonds, leasing, and securities, in order to increase financial support for natural gas utilization and the construction and operation of infrastructure. Strengthen financial services for private investment, and actively promote approaches such as Public-Private Partnerships (PPP) to attract private capital for the investment, construction, and operation of natural gas infrastructure. In the fields of clean energy utilization and air pollution control, support is provided for pilot implementation of financial support policies in key regions such as Beijing, Tianjin, Hebei, Shanxi, Shandong, and Henan. 　　(VI) Boost technological innovation Accelerate scientific and technological research and the industrialization of equipment. By integrating government, industry, academia, research, and practical application, increase investment in basic and applied research on natural gas utilization to facilitate the transformation of research results into practical uses. Closely follow the development of cutting-edge global technologies and strengthen exchanges and cooperation. Promote technological research and development as well as localization of materials (including high-manganese austenitic steel, Invar alloy, etc.) and equipment (including gas turbines, small combustion engines, fifth-generation high-pressure direct injection engines for vehicles, single-fuel engines for large LNG ships, etc.) in the field of natural gas utilization, and encourage and advance the industrialization of such equipment. 　　Developing LNG transportation and vehicle fuel technologies. Accelerate the improvement of the efficiency of LNG transportation by water, rail, and road, promote intermodal transport, explore the development of technologies and equipment for transporting LNG in containerized form, and enhance the flexibility of LNG transportation. Encourage and guide LNG vehicle manufacturers to increase investment in research and development of technologies related to electronic control systems, engines, gas cylinders, and evaporative gas recovery, in order to improve the operational efficiency of natural gas vehicles. 　　(VII) Promote pilot projects and demonstrations 　　Actively explore and carry out pilot initiatives, focusing on strengthening reforms and innovations in key areas and critical links, in order to develop a range of sustainable and replicable pilot experiences. First, within the framework of the overall plan for reforming the oil and gas industry, orderly support should be provided to provinces and cities such as Sichuan, Chongqing, Xinjiang, Guizhou, Jiangsu, Shanghai, and Hebei to carry out comprehensive or targeted pilot projects for reforming the natural gas sector. Second, improve the fair access mechanism for third parties to natural gas pipelines, advance pilot projects for the opening of LNG receiving stations to third parties, and strengthen supervision over the fair opening of natural gas pipeline infrastructure. Third is to advance pilot projects for the market-based reform of natural gas prices, among others. 　　IV. Strengthening Resource Supply Assurance 　　(A) Improving Resource Assurance Capacity 　　By increasing investment in the exploration and development of conventional, deep-sea, and unconventional natural gas resources within the country, actively introducing foreign natural gas resources, advancing research and development on alternative oil and gas technologies, promoting pilot projects for coal-to-gas production, and fostering the utilization of biomass energy, an economic and reliable diversified supply structure can be established. Encourage social capital and enterprises to participate in the exploration and development of overseas natural gas resources, the procurement of LNG, as well as the construction of infrastructure such as LNG receiving stations and pipelines. Priority shall be given to ensuring gas supply for urban residents and public services. 　　(II) Strengthen infrastructure development and pipeline interconnection Oil and gas companies should accelerate the progress of major projects such as natural gas main lines, branch lines, and connection lines. A system should be established whereby the project entity reports regularly to the competent project authority on the progress of construction; meanwhile, the competent project authority should set up a communication mechanism with the departments responsible for auditing major projects in order to share information related to project construction. The department in charge of auditing major projects can strengthen supervision during and after the project construction phase, conduct irregular inspections, and urge the progress of project construction. It supports the construction of transmission pipelines for coalbed methane, shale gas, and coal-to-natural gas, as well as the connection of gas sources in nearby locations. Accelerate the interconnection of pipelines, break down monopolies among enterprises, across regions, and at the administrative level, and enhance the ability to coordinate resource allocation. Accelerate the construction of infrastructure for the “last mile” of natural gas utilization in areas surrounding cities, in urban-rural fringe zones, and in rural areas. Pilot projects for natural gas infrastructure construction are carried out by selecting investment partners through bidding and other methods. 　　(III) Establish a comprehensive gas storage, peak-shaving, and emergency support system. Natural gas sales companies are responsible for providing peak-demand gas supply on a seasonal (monthly) basis in the markets they serve, while urban gas companies are responsible for such supply on an hourly basis. The responsibility for daily peak-shaving gas supply is shared by both sales companies and urban gas companies, as specified in the natural gas purchase and sale contracts. Natural gas sales companies, infrastructure operation firms, and urban gas providers should establish emergency response plans for natural gas. Natural gas sales companies should establish their own natural gas reserves, aiming to have a working gas volume equal to at least 10% of their annual contracted sales volume by 2020. Local people’s governments at the county level and above shall promote the construction of gas storage and peak-shaving facilities such as LNG and CNG, organize the formulation of emergency gas response plans, and take comprehensive measures to ensure an emergency gas storage capacity that is sufficient to meet at least the average demand for 3 days in their respective administrative regions. 　　Enterprises responsible for gas storage and peak-shaving are supported in building, co-building, or leasing gas storage facilities; they are also encouraged to purchase peak-shaving services and other supplementary services such as peak-shaving gas volumes from third parties. It allows users to participate in natural gas peak shaving by purchasing interruptible gas supply services and other methods. Liberate the use rights of gas storage geological structures, encourage participation from various capital sources, and innovate in investment and financing as well as construction and operation models. Existing LNG receiving stations are encouraged to add more storage tank berths and expand their pressure boosting and gasification facilities in order to improve their storage and transfer capacity.