Natural Gas Supply to CAPCO/CLP
An Introduction to LegCo Panel on Economic Development8th January 2013
CB(1)401/12-13(01)
CLP Pioneered Gas-fired Power Generation in Hong Kong in 1996
2nd longest subsea pipeline in the world when built in early 1990’s
One of the 4 largest offshore gas fields in China at that time
Black Point Power Station~800km
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Energy MoU signed with National Energy Administration
3 sources of new natural gas supply identified to be pursued: Second West-East Natural Gas Pipeline (WEPII) A new Liquefied Natural Gas Terminal in Shenzhen New gas supplies from the South China Sea
The Energy MoU signed in 2008 ensured long term clean energy supply to Hong Kong
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The Second West-East Gas Pipeline – the earliest available gas supply to Hong Kong to sustain gas-fired power generation
Second West‐East Gas Pipeline
Length • Approx. 9,000km, the world’s longest gas pipeline
• 1 truck line & 8 branches• Cover 15 provinces & regions
including Hong Kong
Serving • 500 million people
Capacity • 30 billion cubic metres annually
Source: PetroChina website
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Black Point Power Station –New Gas Receiving Station & Plant Modifications
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Parties PetroChina International Company Limited (PCI) CAPCO
Terms 20 years duration from 2013
Price Clear and transparent pricing mechanism
Contract Price consists of following components:
a) A commodity element, reflecting cost of gas imported from Central Asia to China, in which typically moves in line with prices of oil
b) Transportation element, reflecting cost of pipeline transportation charge for taking gas from the border in Xinjiang to Hong Kong
c) Applicable taxes and duties and administration costs
Government’s scrutiny
Scrutinizing GSA terms and its implementation
Gas Supply Agreement (GSA) for WEPII Gas
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0
10
20
0
30
60
90
120
150
Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12
Gas Price (US$/MMBtu)Oil Price (US$/Barrel)
Crude Oil price (JCC) Japan LNG import price Yacheng price (original gas) China LNG import price
Gas Price Trend
YachengGas
Market
CLP Gas Prices : Yacheng ~$6 ; Short term South China Sea ~$14; Market ~$18-20CLP Gas Prices : Yacheng ~$6 ; Short term South China Sea ~$14; Market ~$18-20
Short term S. China
Sea
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WEPII Gas Price Competitiveness
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^ LNG
* Infrastructure in GDInfrastructure to
HK
WEPII gas to Shenzhen
Guangdong Hong Kong
End Users - Cost Estimates(For illustration purpose at US$100/Barrel crude)
* Referencing Dapeng LNG terminal^ 2012 average import price adjusted to
US$100/Barrel crude (deals concluded after 2006)
Comparison of LNG Import Prices to China and Japan versus Crude Oil Price
Comparison of Cost Estimates to End Users
Under current market, 2013 WEPII gas price is expected to be around US$18 - 20/MMBtu
Price level of WEPII gas supply to Hong Kong is generally in line with LNG import prices Adding infrastructure cost to end users, WEPII gas supply price to Hong Kong is
competitive vs. gas supply to South China region based on LNG imports
Tariff Impact – WEPII Gas Supply
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2012 2013e
Gas Volume/Price
WEPII Gas
Yacheng Gas
Short Term South China Sea Gas
2011
~6~6
~6
~14
~18-20~14
Gas Price in US$/MMBtu
Basic Tariff The additional investment in new gas receiving station and BPPS modification project requires an
increase of Basic Tariff by about 0.9¢/kWh in 2013 With higher than expected local electricity sales in 2012 and continued stringent cost management, we
are able to maintain Basic Tariff unchanged in 2013
Fuel Clause Charge CLP/CAPCO take various mitigating measures
in order to minimize tariff impact due to rising cost of gas
Due to current price differential between WEPII and Yacheng gas, Fuel Clause Charge in 2013 requires an increase of about 7¢/kWh as a result of higher priced WEPII gas
Considering of total fuel costs together with a widening of Fuel Clause Account deficit, we have managed to contain an increase of Fuel Clause Charge to 4.6¢/kWh in 2013
Future tariff adjustment is subject to a host of factors including electricity sales, capital investment, operating cost and fuel mix / cost, etc.
Fuel Clause Charge requires anincrease of about 7¢/kWh
0
1
2
3
CLPPower
Singapore London New York Sydney
Reasonable Tariff with World Class Reliability
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CLP Power
2.3
Remarks: Comparison based on average monthly domestic consumption of 275kWhTariff and exchange rate at November 2012 (CLP tariff excludes Rent & Rates Special Rebate)
HK$/kWhLow Tariff
$1.03
Unplanned customer minutes lost per year
Note: 2009-2011 average
Sydney(CBD)
New York London
19.2
28.3
39.5
0.0
10.0
20.0
30.0
40.0
50.0
High Reliability
$2.78
Singapore
0.5
$2.29$2.02
$1.85
More Reliable Less Reliable
CLP 2013 tariff adjustment
2013Adjustment
Summary
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With WEPII gas supply and infrastructure in place, Hong Kong will continue to benefit from:
Reliable pipeline gas supply replacing depleting Yacheng gas
Gas supply priced under a clear and transparent mechanism
Supply resource available to support increasing gas needed to meet future emissions / fuel mix targets