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Politics

China's hasty switch to natural gas triggers serious shortage

Schools left without heat as localities fail to manage shift away from coal

A clear blue sky frames Beijing's Tiananmen monument in March, thanks to China's anti-pollution measures. (Photo by Akira Kodaka)

BEIJING -- President Xi Jinping's campaign to wean China off coal has resulted in natural gas shortages and skyrocketing prices as localities snapped up the commodity in a rush to comply, leaving the most vulnerable citizens in the cold.

Elementary schools in Hebei Province near Beijing were left without heat earlier this month, lacking the equipment to switch to natural gas. Education officials scrambled to address the problem by installing electric heaters, but complaints still poured in about the lack of cooking gas to prepare meals.

The local government required 2.6 million households to switch from coal to natural gas, 40% more than the province's original target. But supplies at China National Petroleum Corp. and other major state-owned providers reportedly fell short of demand by 10-20%.

Beijing's heavily polluted air grew cleaner as Hebei's heating plants shifted from coal burning to natural gas. But the improved air quality came at the expense of frostbitten schoolchildren, while tight supplies sent the cost of natural gas soaring two and a half times higher than a year earlier -- with an 80% increase over the past month alone.

China's central government responded in early December by prioritizing natural gas for heating over industrial use, and issued a notice calling for stable gas prices. A Dec. 5 opinion piece in the People's Daily, the Communist Party's official newspaper, said the transition from coal to gas must "proceed cautiously" so that fellow citizens won't freeze.

State officials also have permitted the use of dormant coal-burning facilities for emergency electricity and heat generation. Beijing municipal authorities ordered local coal plants to restart temporarily.

These measures restored heating in some areas, and gas prices stabilized. But manufacturers and other businesses seem next in line to suffer the consequences. Ceramic workshops in Hebei Province have ceased operations. Even in Sichuan Province and the Chongqing municipal area -- two major gas-producing regions -- chemical factories have begun adopting production limits.

"This turmoil has occurred because government leaders in outlying areas, underestimating the demand-supply balance, endeavored only to score points from the Politburo," said a senior executive at a Chinese energy company. "The shift toward natural gas needs to be advanced at a more reliable pace."

China is expected to consume 240 billion cu. meters of natural gas this year, up 10% from 2016 and nearly double the amount from five years ago. The volume is seen rising to nearly 300 billion cu. meters in 2020. But with domestic production projected to fall short at 200 billion cu. meters by that date, the country will need to bridge the gap through imports.

Chinese enterprises are moving to procure more gas. In November, China Energy Reserve and Chemicals Group made a bid for Australian natural gas developer AWE. Others inked a preliminary agreement to jointly develop liquefied natural gas in Alaska during U.S. President Donald Trump's China visit the same month.

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