How Much Do You Know About the History of City Gas Development?
- Time of issue:2021-11-15 16:48:27
How Much Do You Know About the History of City Gas Development?
- Time of issue:2021-11-15 16:48
The development of the gas business in China was very slow. By 1949, only 9 cities in the country had gas facilities. And generally in the situation of old equipment and backward technology, only 270,000 people used the gas. With the continuous development of metallurgy and petroleum industry, China's natural gas industry has entered a rapid development stage.
Since 1965, LPG has been promoted and used throughout the country. By 2005, the gas popularizing rate in China's cities had reached 92%. China is one of the countries with large natural gas reserves, and the development of the natural gas business has a promising future. According to statistics, China's natural gas production increased from 17.4 billion cubic meters in 1995 to 34 billion cubic meters in 2003. Natural gas utilization will also be developed rapidly, and its proportion in China's primary energy consumption structure is expected to increase from the current 1.7% to 7% in 2010. By then, it will play a constructive role in improving China's urban environment, raising residents' living standards and accelerating urban modernization. In particular, the development, construction and utilization of natural gas resources such as the West-East Gas Pipeline. The 21st century will be a new era of rapid development of the natural gas business in China.
Gas is widely used in industrial production for power generation, steel making, metal thermal processing, heat treatment, etc. In the light textile industry, people use it for cotton textile singeing, food, pharmaceutical processing and manufacturing, bulb blowing, color television picture tubes and computer monitors and other glass products. The application of gas not only increases production efficiency, but also improves product quality. With the popularity of LPG and natural gas, the range of gas applications is sure to be further explored.
Main types of city gas
At present, China's city gas industry has both the earliest artificial gas production and supply methods, as well as the more advanced production and supply methods of liquefied petroleum gas and natural gas in the world today.
(1) Natural gas
Natural gas is both a raw material gas for forming ammonia, acetylene and other chemical products, and a high-quality fuel gas, making it an ideal city gas source. Natural gas is widely used around the world because it is both economical and easy to extract, store, transport and use.
(2) Liquefied petroleum gas
LPG is part of the hydrocarbons obtained as a by-product of the extraction and refining of petroleum. It is in a gaseous state at room temperature and pressure, and can be easily transformed into a liquid state when the pressure increases or the temperature decreases. As a basic chemical material and a new fuel, LPG has received more and more attention.
In chemical production, it is used to produce synthetic plastics, synthetic rubber, synthetic fibers and the production of pharmaceuticals, explosives, dyes and other products. The use of LPG as fuel has been widely introduced into people's life due to its high calorific value, no soot, no residue, and easy operation and use.
(3) Manufactured gas
Manufactured gas is a combustible gas made from solid or liquid combustible materials through various thermal processes, including:
a. Retort gas
The combustible gas obtained by dry distillation using coal as raw material such as coke oven or vertical charcoal stove is called dry distillation gas. With high calorific value, the main combustible components of dry distillation gas are hydrogen, methane, carbon monoxide, unsaturated hydrocarbons.
b. Gasification gas
The combustible gas obtained from solid fuel as raw material is called gasification gas after gasification reaction in the gasifier (air, oxygen, water vapor, etc.) under high temperature conditions. Gasification gas has a low calorific value, high carbon monoxide content, high toxicity, and is not suitable as a city gas source alone.
c. Oil gas
It is a flammable gas made from petroleum and its products as raw materials and cracked at high temperatures. The composition of oil gas is mainly hydrogen and contains a considerable amount of methane and carbon monoxide, which has a high calorific value and can be used as a city gas source or blended with low calorific value gas to increase the gas supply and serve as a peak-shaving gas source for the city.
Status of development of China's city gas industry
(1) The city gas industry is developing rapidly with an ever growing market
As an important part of urban infrastructure, the development of city gas plays an extremely important role in the modernization of cities. Improving the level of city gasification is important to better the life of urban residents, perfect the urban environment, boost energy utilization.
With the increasing length of upstream transmission and distribution pipelines and the continuous development of urbanization in China, the scale of China's city gas industry brings about an ever growing market as the continuous rising of the downstream demand for gas. In 2014, China's gas sales revenue reached 492.879 billion yuan, up 19.14% year-on-year.
(2) Overall high city gas penetration rate with uneven regional development
With the continuous improvement of China's city gas public utilities, the city gas penetration rate is higher overall. Data from the National Bureau of Statistics show that China's city gas penetration rate rose from 87.4% in 2007 to 94.56% in 2014. However, due to regional economic development levels, gas supply and other issues, regional development is uneven: on the whole, the gas penetration rate in the eastern and southern coastal provinces and cities is higher than the national average, while most central and western provinces and cities, as well as the northeastern region, have low penetration rates due to incomplete construction of facilities and insufficient gas supply.
(3) Rapid development of urban pipeline network
In recent years, China's natural gas pipeline network in urban aera has developed rapidly, with approximately 4,500 km of new natural gas pipelines added in 2014, bringing the total length of natural gas pipelines nationwide to over 80,000 km, and will continue to show rapid growth in the future.
(4) The structure of gas consumption continues to be optimized, and natural gas is increasingly becoming the dominant source of city gas
Due to the economics of natural gas and its environmental advantages as a clean energy source, as well as with the diversification of natural gas sources and the improvement of urban gas pipeline facilities in China, the apparent consumption of natural gas in 2014 was 183 billion cubic meters, an increase of 8.2% compared to 2013. The share of the primary energy consumption structure increased from 2.39% in 2003 to 6.2% in 2014.
The competitive landscape of China's city gas industry is characterized by the coexistence of monopoly and competition.
On the one hand, the city gas industry is related to people's livelihood with a large investment, and initially it is mostly invested and exclusively operated by local state-owned natural gas companies funded by the government. Since infrastructure such as gas pipeline networks have a natural monopoly that cannot be replicated in a specific region, city gas companies with a local state-owned enterprise background occupy a relatively monopolistic operating position in a specific region by virtue of their first-mover advantage.
On the other hand, the market competition factor is increasing under the policy encouragement. In March 2002, the National Development and Reform Commission issued a new "Guidance Catalogue for Foreign Investment Industries", which included for the first time urban infrastructure such as gas, heat and water supply and drainage, where foreign investment was prohibited, as an open field to the outside world.
Major barriers to entry into the industry
(1) Franchise barriers
According to the "Urban Gas Management Regulations", China implements a licensing system for gas operations. Enterprises engaged in gas business activities, must have a gas source and gas facilities in line with national standards, and establish a sound safety management system. The main person in charge of the enterprise, production safety management personnel, as well as operation, maintenance and repair personnel need to be professionally trained and qualified. Qualified by the local people's government at or above the county level gas management department issued a gas business license. China prohibits individuals from engaging in piped gas business activities.
(2) First-mover advantage in the formation of a specific regional exclusivity barriers
Since the city gas industry is related to people's livelihood, and infrastructure investments such as gas pipeline networks are large and non-replicable in specific regions. In order to avoid duplication of investments, improve resource utilization efficiency, and achieve cost minimization and safety guarantee maximization, city gas investors and operators are usually granted franchises, with a certain degree of exclusivity in the region for a longer period of time after they are identified. As a result, city gas companies in China operate in a somewhat exclusive position after obtaining concessions in specific areas.
(3) Gas supply barriers
Natural gas is a national strategic basic energy source, and the supply of natural gas in China is basically controlled by three large central enterprises, namely CNPC, Sinopec and CNOOC.
(4) Capital barriers
The city gas industry is typically a capital-intensive industry, with huge initial investments in infrastructure such as natural gas pipeline networks and relatively long construction cycles, which cannot generate revenue until the pipeline networks are completed and put into formal operation, thus placing high demands on the financial strength of operators. The companies that lack the strong capital strength to complete the construction period and other basic investments in natural gas pipeline networks will have difficulty entering the city gas industry.
(5) Management and technical barriers
City gas technology itself is a set of system projects with strict standards, involving gas sources, transmission, distribution and storage, gas applications, safety management, information systems, new equipment (new processes, new materials) applications, etc. It requires long-term experience and technical precipitation, and therefore poses a high management and technical barrier to new entrants. Therefore, it forms a high management and technical barrier for new entrants.
Plus and minus factors affecting the development of the industry
(1) National industrial policy support.
(2) Robust demand due to urbanization process.
(3) The economic and environmental advantages of natural gas.
(4) "Blood-making capacity” - the huge potential of natural gas resources in China.
(5) "Blood transfusion capacity" - accelerated construction of nationwide natural gas transmission pipeline network.
(1) The gap between supply and demand will persist for a longer period of time, leading to an increase in external dependence.
(2) The overall gas infrastructure is still weak, with insufficient town gas peaking, emergency and reserve capacity.
(3) Uneven regional development of city gas.
(4) There is still a large gap between the technical level and developed countries.
Industry-specific business models
City gas operators distribute natural gas, liquefied petroleum gas and manufactured gas to various end-users through city pipeline networks or bottles.
According to the "Urban Gas Management Regulations", which came into force on March 1, 2011, the state implements a licensing system for gas business, and enterprises that meet the conditions for engaging in gas business activities are issued gas business licenses by gas management departments of local people's governments at or above the county level.
The main activities of city gas operators are currently gas sales and gas installation.
(1) Gas sales
The gas sales business is mainly a form of business in which city gas operators purchase gas from upstream producers and then distribute it to downstream end consumers. The gas sales business mainly earns the difference between upstream and downstream gas prices. Since both upstream and downstream prices are set by the government, the unit profit margin of this part of the business is low but relatively stable considering the public goods attribute of gas, and the increase in revenue and total profit is mainly due to the increase in gas sales volume.
(2) Gas installation
Gas installation refers to city gas utilities providing gas facilities and equipment installation services to new gas customers and charging the corresponding installation fees, and the operating profit margin of this part of the business is relatively high.
In addition, city gas utilities also provide customers with services such as relocation and removal, meter replacement and calibration, and collect service fees from customers in accordance with the rates approved by the local government price authorities, but this portion of revenue accounts for a small percentage of the operating income of city gas operators.
Although China has made great achievements in developing city gas, there are still gaps compared with developed countries internationally, mainly reflected in small scale, high cost, low labor productivity, poor economic efficiency, and important technologies with international standards. As city gas enters millions of homes, safety issues are becoming increasingly prominent, with gas accidents occurring repeatedly around the world. Therefore, it has become an urgent task for gas management and operation units to popularize knowledge of gas safety and proper use among customers and to take proactive safety measures to actively prevent accidents.