“The shift from coal to gas is an inevitable trend, and there is significant demand for natural gas

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“The shift from coal to gas is an inevitable trend, with significant demand for natural gas. Author/Source: Date: 2016-05-16 Clicks: 71. As 2016 began, various factors such as stricter environmental policies, falling costs of natural gas, and the provision of equipment at no cost by companies involved in the transition from coal to gas contributed to the continued advancement of this trend. Additionally, in early April, the **Energy Bureau issued a notice on the issuance of the Guidelines for Energy Work in 2016**, stating that in 2016, China’s total energy consumption would be around 4.34 billion tons of standard coal. The share of non-fossil fuel consumption was expected to rise to about 13%, while the share of natural gas consumption was set to increase to around 6.3%. Meanwhile, the share of coal consumption was expected to drop below 63%. Under the overall energy policy of \"reducing coal use and increasing gas use,\" switching from coal to gas has become an inevitable trend. It has been observed that since 2016, the process of switching from coal to gas has accelerated in some provinces and cities, resulting in significant demand for natural gas in the future. Environmental protection policies are pushing forward the transition from coal to gas. icis-china.com Since the State Council issued the \"Action Plan for Air Pollution Control\" on September 10, 2013, various regions have introduced policies aimed at addressing air pollution, reducing overall coal consumption and increasing the use of clean energy. Coal-fired boilers and power plants have become targets for renovation, especially small and medium-sized ones. Some provinces and cities have set quantitative targets for energy conservation and emission reduction, and are stepping up efforts to replace coal with gas. The transition from coal to gas in various regions is primarily driven by **mandatory regulatory measures from various departments; for example, power supply agencies cut off electricity to companies that fail to make the necessary adjustments within the set deadline, environmental protection agencies impose additional fees for pollution control, and industrial and commercial authorities refuse to issue business licenses to such companies. However, the policies regarding the transition from coal to gas vary from place to place, mainly in terms of the scale of the reforms, the timing involved, and the level of subsidies provided. In areas where these policies are strictly enforced and substantial subsidies are available, the transition from coal to gas progresses more rapidly. Below, we analyze some of the regions where progress has been faster, as follows: Lower gas prices contribute to the transition from coal to gas. ICIS Energy notes that cost considerations have always been a key factor restricting the development of the market for industrial transitions from coal to gas; high natural gas costs over the years have slowed down this process. On November 20, 2015, the price of natural gas at distribution stations for non-residential users across the country was reduced by 0.7 yuan per cubic meter, **which lowered the cost of natural gas as a raw material in the process of replacing coal with gas, and thus helped to accelerate this transition in various regions to a certain extent. It is estimated that for a 10-ton natural gas boiler, a reduction of 0.7 yuan per cubic meter in the price of natural gas can result in cost savings of around 300,000 yuan per month solely for the cost of natural gas (based on an assumption that a 1-ton natural gas boiler consumes 60 cubic meters of gas per hour and operates at full capacity on a continuous basis). This represents a significant advantage for companies that switch to using natural gas, as it helps them reduce costs and improve efficiency. It is worth noting, however, that as natural gas prices dropped, coal prices also fell. According to Anxunsi, the coal price in the Beijing-Tianjin-Hebei-Shandong region is currently around 600–800 yuan per ton. At equal calorific value, the cost of natural gas is still about three times that of coal. Although the reduction in natural gas prices is beneficial to the shift from coal to natural gas to some extent, considering the short-term economic benefits, some end-users remain cautious or even resistant to such a shift. http://img.yf116.cn/image/img/20160516/918563353665.jpg http://img.yf116.cn/image/img/20160516/919283356871.jpg http://img.yf116.cn/image/img/20160516/92073360786.jpg http://img.yf116.cn/image/img/20160516/920383363815.jpg http://img.yf116.cn/image/img/20160516/92143366414.jpg http://img.yf116.cn/image/img/20160516/921313369182.jpg http://img.yf116.cn/image/img/20160516/921583371814.jpg http://img.yf116.cn/image/img/20160516/922303375088.jpg Since the second half of 2014, the overall domestic LNG market has been characterized by an oversupply, leading to a continuous decline in LNG prices, with a total drop of over 2,000 yuan per ton. For example, the average price in Shaanxi Province was 4,908 yuan per ton in December 2014, but it dropped to just 2,473 yuan per ton in April 2016, a decrease of 2,435 yuan per ton. In many places, the price of LNG is lower than that of pipeline natural gas, prompting some end-users to choose LNG as a fuel source. Taking Hangzhou as an example, the current price of pipeline natural gas for non-residents in Hangzhou is around 3.3 yuan per cubic meter, while the delivery cost of LNG to Hangzhou is about 3,350 yuan per ton; after gasification, this amounts to 2.3 yuan per cubic meter. Considering cost factors, some companies build their own LNG vaporization stations and choose LNG as the fuel for replacing coal with gas. According to Anxunsī’s incomplete research, in 2015, the shift from coal to gas led to an increase in LNG demand of about 20 trucks per day in Hebei Province, and around 5 trucks per day in Hangzhou. However, although LNG prices are lower than those of pipeline natural gas in some areas, the shift from coal to gas is likely to continue to rely primarily on pipeline natural gas. The main reason is that the gas pipeline networks in most cities are already well-developed; **due to concerns regarding gas safety and other factors, the relevant departments impose restrictions on the approval process for building LNG vaporization stations. Overall, policies remain the strongest driving force behind the shift from coal to gas, and environmental protection regulations in various regions set 2017 as a deadline; therefore, the pace of this shift will accelerate further in the next 1-2 years.