Natural gas industry chain analysis



Overview of the whole industrial chain of natural gas

1. Product types and characteristics of the whole industrial chain of natural gas

Natural gas is mainly divided into two categories: natural gas stored in nature and artificial natural gas (such as coal gas generated by coking and oil and gas generated in the process of petroleum refining), in which natural gas is mainly stored, and the volume of artificial synthetic gas is small. Natural gas flow is mainly divided into gaseous natural gas and liquid natural gas two forms. Due to the relatively low scale of China's natural gas reserves, China's proved natural gas reserves ranked 11th in the world in 2016, only 11% of Iran, which can not meet the domestic demand for natural gas. Therefore, China's natural gas market still needs to be supplemented by imported natural gas. In order to facilitate long-distance transportation, gaseous natural gas is usually processed into liquefied natural gas (" LNG ") under normal pressure and low temperature (-160 ° C), and the gas content of one ton of liquefied natural gas is equivalent to 1400~1500 cubic meters of gaseous natural gas. In areas where there is no pipeline through, gaseous natural gas can be pressurized into cylinders to form compressed natural gas (" CNG "for short) to achieve small distribution. Although natural gas products exist in different phase states, from the perspective of molecular structure, its main component is a carbon compound ----- methane (CH4). Its chemical properties are similar, only the storage forms or ways are different.

Natural gas has the characteristics of high calorific value, low carbon emission and high economy. From the perspective of calorific value, the average calorific value of 1 cubic meter of gaseous natural gas under normal pressure is 8,800Kcal, and the calorific value of 1 ton of LNG is about 12,496Kcal (assuming that 1 ton of LNG is 1,450 cubic meters/ton of gaseous natural gas), and the calorific value of LNG is 2.72 times, 1.23 times and 1.25 times of coal, diesel and fuel oil of the same weight. From the perspective of carbon emissions, the carbon emissions of the same weight of LNG are 0.78 times, 0.76 times and 0.72 times of coal, diesel and fuel oil. From the economic point of view, in addition to coal, the price of natural gas unit Kcal heat is the lowest, about 2.96*10-4 yuan /Kcal. Therefore, compared with other energy sources, natural gas, as a low-carbon clean energy, safe and efficient energy, is more in line with the current and future energy requirements of China.

2. Coverage of the whole industrial chain of natural gas

China's whole natural gas industry chain involves the production, trade, transportation, storage and sales of natural gas. There are many and complicated links. According to upper, middle, downstream and end customers, the natural gas industry chain can be divided into: In terms of upstream gas sources, China's natural gas source structure is dominated by the exploitation of self-owned natural gas reservoirs, supplemented by imported gas (including imported pipeline gas and imported LNG). However, due to the difference in the growth rate of gas supply, the proportion of gas source structure will change, among which the proportion of imported gas will gradually increase, and the proportion of self-produced gas will decrease. In midstream storage and transportation, imported pipeline gas and self-produced gas enter China and are transported to each province through backbone pipelines, and provincial pipelines enter each city. During this period, part of pipeline gas is processed into LNG by liquefaction plants and transported by tanker to areas without pipeline laying. After LNG enters the Chinese market through the receiving station, part of it is gasified into the backbone pipeline, and part of it is transported to the distribution facility by tank trucks. In this link, gas storage is set up for natural gas storage and peak regulation. In the downstream distribution link, the pipeline gas enters the city and then enters the downstream users through the municipal pipeline; LNG transported by tankers is sold to downstream automotive and industrial users through filling stations. The end users of natural gas are mainly residential users, industrial users and automobile users, of which residents mainly use natural gas for heating, industrial users use natural gas for heating or synthetic basic chemicals, fertilizers, etc., and auto gas is mainly used to provide kinetic energy for various types of vehicles.

According to the differences of product forms in the industrial chain, the natural gas industry chain can be divided into two chains: gaseous natural gas chain, the two main gas sources of natural gas, natural gas and imported pipeline gas, enter the consumption province through backbone pipelines and provincial pipelines, and then transported to the user end through urban pipelines; Liquefied natural gas chain, imported LNG as a liquefied natural gas gas source into the country through the receiving station, and then transported to the refueling station through the LNG tanker. The two chains are not parallel and have no intersection. For example, some LNG enters the backbone pipeline after gasification at the receiving station. Pipeline natural gas is converted into LNG after liquefaction through liquefaction plants and enters the liquid chain. In addition to the different phases of the natural gas industry chain, the pricing methods of each product are also different. The price of gaseous natural gas in the industry chain is mainly regulated by the state, while the price of liquefied natural gas is relatively market-oriented.

The natural gas industry is a capital-intensive industry with uneven distribution of resources, large investment scale of pipeline facilities, and strict policy control, which makes it difficult for private enterprises to participate in the industry. The marketization degree of some links in the industry is low, the product price cannot fully reflect its value in the market, and even the annual profit of some links is inverted. Therefore, it will analyze the operation mode, pricing policy and main status quo of each link from top to bottom of the industrial chain. In order to highlight the characteristics of the flow and pricing of different phases of natural gas products in the industrial chain, this paper elaborates on the gas chain.

Second, gaseous natural gas source

1. Natural gas exploitation

(1) There are few participating enterprises in the mining link and strong monopoly

China implements a strict qualification examination and approval system for the exploitation of natural gas, and the relevant competent departments authorized by The State Council shall examine and approve and issue licenses for the exploration and exploitation of specific minerals such as oil and natural gas. Although China has successively issued policies to encourage and support private capital to enter the field of oil and gas exploration and development, the relevant legislation has not been amended, and the factors such as high exploration and exploitation cost and long cycle have been added. Up to now, private enterprise capital has rarely obtained oil and gas mining rights alone. Therefore, China's natural gas mining links have the characteristics of few participating enterprises and strong monopoly. At present, the main entities with natural gas exploration and exploitation qualifications are three barrels of oil and four Yanchang oil companies. Among them, CNPC and Sinopec are mainly responsible for land oil exploration and development, and their registered exploration rights account for about 40% of the country, and the mining rights account for about 80% of the country, totaling more than 1.7 million square kilometers, with oligopolistic advantages. Cnooc focuses on offshore oil exploration and development; Yanchang Petroleum has the right to explore and develop oil and gas resources in a specific area.

(2) The operation mode of the mining link is simple, but the capital and technology needs are high

The operation mode of natural gas mining is relatively simple, and the mining body needs to export the mineral resources after exploration and development, collection and purification through backbone pipelines, and partly convert into LNG and transport to the consumption end by tanker, but it has high requirements on the scale of capital investment and mining technology. Among them, natural gas exploration and development is mainly seismic exploration (exploring the underlying form, structural characteristics, oil and water features and other information), which is usually carried out at the same time as crude oil exploration, so the overall exploration and development expenditure is large. In 2015, when the oil price plummeted, CNOOC reduced the exploration and development expenditure by 30% of the capital expenditure. At the same time, affected by the high scale of capital investment in the early stage of oil and gas resources exploitation, the domestic enterprises participating in this link are large state-owned central enterprises with strong strength. In the recovery stage, the pure natural gas reservoir needs to inject other gases or liquids to squeeze out the natural gas, and the associated gas with crude oil needs to be separated in this stage. There are also differences in the cost of drilling under different gas reservoir conditions, but with the lengthening of the production period of gas reservoir, the production cost generally declines first and then increases. Therefore, the production technology is the main factor to reduce the cost. The technical barriers of late purification are low, mainly for the removal of impurities such as water, water vapor, sulfide and carbon dioxide in natural gas. On the whole, the process involved in mining is relatively complicated and the business model is relatively simple, but the exploration and development process requires a large amount of capital investment, and the importance of continuous recovery technology is highlighted with the harvest period. Due to the time and capital investment required before the exploitation of self-owned gas reservoirs, it is difficult to achieve a large increase in the scale of self-produced gas in the short term. Therefore, with the rapid increase of natural gas consumption, the growth rate of self-produced gas exploitation is lower than the growth rate of consumption, and the proportion of self-produced gas in China's gas source structure has declined year by year, and the proportion has dropped to 60% at the end of 2017, and the proportion will further decline in the future.

(3) The ex-factory price has changed from the main regulated price to the indirect regulated price

At first, the factory-gate price of each gas field was submitted to the National Development and Reform Commission for review, and the Commission determined the benchmark price of natural gas according to the cost plus reasonable profits and taking into account the affordability of end users. After 2013, the state no longer took the factory-gate price of natural gas as the supervision link, but took the gate price formed by adding factory-gate price to pipeline transmission fee as the key control price. The ex-factory price is based on the gate price minus the intermediate pipe transmission fee, so the price of this link is currently an indirect control price. Although the control link is transferred downward, the cost relationship of natural gas produced in major gas fields in China can be judged from the ex-factory benchmark price as follows: Xinjiang oil fields < Qinghai oil fields < Changqing oil fields < Chuanyu gas fields < other gas fields.

2. Gas imports

(1) China has basically formed four natural gas import channels, of which gas is mainly imported by pipeline

Imported natural gas is mainly imported into China through land international pipelines and sea ships. It is expected that in 2019, after the eastern route of the China-Russia natural gas pipeline is completed, China's natural gas imports will form four major import channels in the northwest, southwest, northeast and east, of which the eastern channel mainly imports LNG from Australia, Qatar, Malaysia, Indonesia and other places, mainly liquefied natural gas imports, and gaseous natural gas imports mainly pipeline imports. Pipeline imports are mainly northwest, southwest and northeast import channels, which are respectively undertaken by Central Asia Pipeline, China-Myanmar Pipeline and China-Russia pipeline. After the import pipeline enters China, it is connected with the domestic backbone pipeline and transported to the main consumption area. After entering Xinjiang, Central Asia Pipeline Lines A, B, C and D are directly connected with the second, third and fifth lines of West-East gas transmission, and spread eastward to the eastern gas use area; After entering Guizhou, the China-Myanmar Pipeline intersects with the Guangnan Branch of West-East Gas Transmission Line and the China-Guizhou Line, which mainly supplies Yunnan, Guizhou and Guangxi gas consumption areas. The starting point of the China-Russia pipeline construction in China is Heilongjiang, through Jilin, Inner Mongolia, Liaohe, Hebei, Tianjin, Shandong, Jiangsu, and finally arrive at the domestic pipeline part of Shanghai, which can supply imported pipeline gas to the Beijing-Tianjin-Hebei region, the Yangtze River Delta and other provinces and cities around Shanghai. Diversified imported natural gas to a large extent to supplement China's natural gas supply gap, while enhancing China's energy security.

(2) The pipeline gas import project has a long cycle and a large investment scale, and usually needs to sign a long agreement

In the import link, due to different forms of natural gas transport, investment scale is different, resulting in different business models. The process of pipeline natural gas import project includes: signing gas supply agreement, pipeline construction, gas supply. Because the pipeline planning and construction period is long, the investment scale is large, the specificity is strong, and the whole gas supply process needs 3 to 5 years to open up, so the two sides will sign a long-term agreement at the beginning of the project, the agreement period is usually 20 to 40 years, the contract should lock the transaction scale and transaction price, and even the two sides will invest in the construction of pipeline facilities. In order to prevent the gas supplier and the demand side from breaking the contract during the pipeline construction process and affecting the continuity of the entire project, and ensure the demand side has a stable gas source, the project investment funds of both sides can recover the cost in the subsequent transaction. At the same time, due to the above reasons, the main player in China's import of pipeline gas is CNPC. The growth rate of pipeline gas imports is relatively stable, with a growth rate of 8.80% in 2017, and the import volume accounts for 18% of the overall natural gas supply. With the continuous operation of pipelines under construction, the future import pipeline gas volume will continue to increase.

(3) The price of imported pipeline gas is greatly affected by the long-term agreement signed in the early stage

The import price of pipeline gas is composed of the cost of gas source and the international pipeline transportation fee (which is levied by the pipeline investor). Because the price of imported pipeline gas is determined by the long-term agreement signed when the natural gas price was high, the gas price is high. Although CNPC has not publicly disclosed the specific gas supply prices in the long-term agreement signed with various gas suppliers, the import unit price calculated according to the import volume and import amount of pipeline gas on the website of China Customs shows that the price of imported pipeline gas since 2017 is 1.25 yuan/cubic meter ~1.40 yuan/cubic meter, which is higher than the ex-factory price of major domestic gas fields. After imported pipeline gas enters the domestic pipeline, it is priced according to the domestic pipeline gas pricing method and guided by the benchmark gate price, so the import price and market price are often inverted, resulting in huge losses in the imported pipeline gas and pipeline transportation business of petrochina in recent years, which also makes fewer enterprises enter the imported pipeline gas segmentation field.

Third, gas storage and transportation

Due to the distance between China's natural gas deposits and the main market, storage and transportation facilities are needed between the time the gas leaves the wellhead, the ship and the client. China's natural gas storage and transportation system is composed of backbone pipelines, provincial pipelines connecting LNG receiving stations, LNG liquefaction plants, LNG tankers and underground gas storage, among which the storage and transportation facilities of gaseous natural gas are backbone pipelines, provincial pipelines and underground storage. The following part will focus on the development of gas storage and transportation facilities, business models, pricing methods and residential - non-residential gas price integration.

Transportation pipeline approval is complicated and the investment recovery period is long, and the development of underground gas storage is lagging behind

In the storage and transportation of gaseous natural gas, the backbone pipeline refers to the long transmission pipeline between the wellhead and the provinces, and the provincial pipeline refers to the regional short-distance pipeline between the city distribution pipeline after the natural gas enters the province, and the gas source is mainly imported pipeline gas and self-extracted natural gas. Inter-provincial (municipal) pipeline projects need to be submitted to the National Development and Reform Commission for approval, and need to be approved by the Ministry of Planning and Construction, the Ministry of Land and Resources, the Ministry of Environmental Protection and other departments of the provinces and cities through which the pipeline passes. The procedures are complicated and the approval period is long. Natural gas pipeline investment scale is large, according to the investment situation of the domestic pipeline has been put into use, the investment cost per kilometer of pipeline at the level of 10 million to 30 million, and the pre-construction investment depends on the recovery of pipeline transportation costs, the overall recovery cycle is long. Underground gas storage is the most effective way to solve the problem of imbalance between gas supply and gas use. Compared with other gas storage facilities (surface storage tanks and high-pressure pipelines), it has the advantages of large gas storage capacity, good economy, and not being affected by climate, which can solve the problem of seasonal gas use imbalance. Compared with other peak loading facilities, underground gas storage has great advantages, and it is the main facility for strategic natural gas reserve and commercial reserve. The construction of underground gas storage in China started relatively late. In the 1990s, with the construction of Shan-Beijing natural gas transmission pipeline, the country began to vigorously study the construction of underground gas storage technology in order to further ensure the safe gas supply to Beijing and Tianjin. In 2000, Dagang Oil Field used the depleted gas reservoir to refer to the first underground gas storage "Dazhangtuo underground gas storage". As of the end of March 2018, the total effective working gas capacity of China's natural gas storage in service was 7.339 billion cubic meters, less than the national gas consumption for 20 days. According to the 13th Five-Year Plan, the national natural gas consumption is expected to be close to 300 billion cubic meters, and the current effective working gas (gas storage capacity consists of effective working gas and bottom gas, of which the effective working gas includes peak gas and emergency gas) is 2.45% of the annual consumption, if the 13th Five-Year storage construction target of 14.8 billion cubic meters is completed, The proportion has increased by 4.83%, which is still a large gap compared with the international proportion level of 10% to 15%, and the development of underground gas storage is lagging behind.