Myanmar piped gas competes head on with LNG in southwest China

By Zhu Minhao

SINGAPORE (ICIS)–Myanmar’s piped gas is making a strong headway into the southwestern Chinese market as it provides a cheaper alternative to liquefied natural gas (LNG), industry sources said on Wednesday.

The China-Myanmar gas pipeline, which is designed with an annual transmission capacity of 12 billion cubic metres, started operations in late August this year.

Over the five-month period of operations in 2013, the pipeline is expected to deliver an estimated 1 billion cubic metres of natural gas from the southeast Asian country to southwestern China, an industry source said.

Full operation of the entire 2,520-kilometre pipeline started on 20 October, according to China National Petroleum Corp (CNPC), a major investor in the project.

Six cities in southwest China – namely, Kunming and Yuxi in Yunnan province; Guiyang, Duyun and Anshun in Guizhou province; and Guigang at the Guangxi Zhuang autonomous region – are now mainly reliant on piped gas from Myanmar, another industry source said.

At yuan (CNY) 2.85/cubic metre (cbm) ($0.47/cbm) in Yunnan province and at CNY2.57/cbm in Guangxi, piped gas from Myanmar is priced lower than LNG’s average delivered price of CNY3.00-4.00/cbm in August-November, industry sources said.

The piped gas prices in Yunnan province and in the Guangxi autonomous region are capped at current levels by China’s central government under a pricing reform implemented on 10 July this year, industry sources said.

Guizhou province, on the other hand, has yet to finalise its import price for the piped gas from Myanmar.

With increased supply of natural gas available for use in the industrial and transportation sectors, consumption of the more expensive LNG will decline, industry sources said.

The expected 1 billion cubic metres of natural gas from the pipeline this year, however, may not be fully consumed by the six cities that part of the volumes will have to be delivered to other regions.

To improve China’s access to Myanmar’s piped gas, more branches to the main pipeline are being constructed – almost 20 in Yunnan, over 10 in Guizhou and eight in Guangxi.

The Guangxi pipelines are likely to come on stream next year, according to an official from Guangxi Development and Reform Commission, with Nanning city expected to receive the piped gas late November.

For Yunnan and Guizhou pipelines, however, no specific timelines were available for their completion.

In the meantime, those areas that do not have access to the Myanmar piped gas will have to continue relying on truck-delivered LNG for supply, a local government official from Yunnan said.

($1 = €0.74 / $1 = CNY6.09)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections