China Utilizing More Natural Gas Vehicles

We were excited that another person finally brought it up.

In a current television interview, Boone Pickens told a reporter he was surprised to find there were 9,000 buses in China working on natural gas.

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In an era of worrisome international warming events, it is arduous to argue with a transportation system that has proven to reduce particulate emissions by 95 % in comparison with diesel engines and which also reduces carbon monoxide and nitrogen oxides by seventy five % and 49 %, respectively.

These are the statistics UPS provides close to its 800 vehicles now running on compressed natural gas (CNG). UPS has the biggest non-public CNG fleet within the United States.

Many cities in China might use the same clean air remedy. And like anything Chinese, natural gas consumption appears to be transferring forward at breakneck pace.

Air pollution in Beijing and in lots of other rapidly rising Chinese language cities has been a nagging ache within the facet of China’s management. The recent development spurt of vehicle utilization, changing many years of bicycling, have additional aggravated the untenable air climate. Mix this issue with Beijing’s mandate to scrub up the air in time for next summer time’s Olympiad, and the primary applicable goal are the automobiles.

Although Beijing won’t convert its transportation fleet that fast, every little bit helps within the scheme of things.

In accordance with the International Association for Natural Gas Vehicles, the most recent (and mostly outdated) statistics show more than 6.3 million natural gas vehicles (NGV) and over 10,000 NGV refueling stations. As of January 2005, China stood simply behind the United States in world rankings for such autos, respectively eighth and ninth.

The variety of NGVs in comparison with conventional gasoline- and diesel-powered autos is a drop within the bucket. But among the extra bold commerce teams hope to succeed in a goal of 50 million by 2020.

China offers probably the most immediate promise, which is probably what drove Boone Pickens to this market. His California-based mostly Clean Power Fuels Corp provides 200 fleet clients, which have about 13,000 NGVs, with the refueling capabilities for these autos with the company’s 168 natural gas fueling stations.

By building distribution networks, company and government consumers can more readily entry the natural gas to power their autos.

This truth is evidenced by the momentum of tiny China Natural Gas, which is servicing town of Xi’an in China’s Shanxi province. Maybe you’ve got by no means heard of the city, however the city now boasts a inhabitants of about eight million. Compressed natural gas reportedly powers 20,000 taxis, 3,000 buses and a couple of,000 special function autos. Over the following three years, the city’s leaders hope to practically double those numbers.

China Natural Gas now has 23 CNG filling stations in the town and hopes to develop exterior Xi’an and into Henan province. Since late April, the corporate’s shares have more than tripled in worth.

Boone Pickens envisions an enormous opportunity in China’s natural gas for transportation functions. Typically, gas is used to fuel electrical energy plants or for cooking. We first brought up the accelerating use of NGVs in our current publication, “Investing in China’s Power Disaster,” due to China’s struggle to quickly and effectively import sufficient oil to energy its economy.

Face it, China has a massive energy appetite. Pickens remarked throughout a recent tv interview, “The activity is unbelievable.” In earlier articles, we compared China’s vitality-consumption and expansion to the Anglo-American-European Industrial Revolution in the course of the eighteenth century.

China’s Coalbed Methane Activity Intensifies

China has a huge appetite for foreign funding to develop all phases of the natural gas fuel cycle. Now we have focused our coverage on the entrance end of the cycle, especially on coalbed methane fuel. This is sensible for China as the nation has one of the vital plentiful supplies of undeveloped coalbed methane (CBM) fuel on the planet. As well as, the country has an extended tradition of coal mining and experience. CBM comes from coal mines and China has the largest number of operating coal mines on this planet.

Talking with Phil Flynn of Alaron Buying and selling in Chicago, he instructed us about China’s drive to energy their transportation system with natural gas, “We are years behind China.” He pointed out that switching over in the United States would turn out to be a nearly unattainable enterprise. “We do not have the supply,” he said. “We must drill beneath the Rockies and below the great Lakes, after which we’d nonetheless develop into dependent upon natural gas imports.”

China has already begun the nation’s marketing campaign for an vitality crossover.

About twelve months after China’s National Growth and Reform Fee (NDRC) introduced it permitted the nation’s coalbed methane development plan, new developments have been parading across our radar almost each week. The fee targeted manufacturing to succeed in 10 billion cubic meters by 2010.

On June 27, Shanghai CIMIC Life invested $196 million to develop a coalbed methane mission in Jiangxi province. Building is already underway.

On July four, China Nationwide Petroleum Corp began exploring a new coalbed methane discovery in the Xinjiang Autonomous region.

On July 6, Shanxi Ganghua Coalbed Methane Corp began building of China’s first giant scale CBM undertaking – a coalbed methane liquefaction challenge.

On July 8, a PetroChina (NYSE: PTR) subsidiary signed an agreement with Shanxi Energy Industries to develop a CBM site in northern China’s Shanxi province. The World Financial institution will finance US$eighty million of the US$190 million project.

On July 20, the town of Shenyang, and capital of Liaoning province, announced it would begin increasing its coalbed methane consumption within the region’s heavy industries to assist scale back the level of pollution in the world.

On July 24, China’s NDRC accredited a proposal from the first foreign firm to develop a coalbed methane mine in China’s Shanxi province. Asian American Fuel is the primary overseas company to acquire NDRC approval in 20 years, and the first to do so in partnership with state-owned China United Coalbed Methane (CUCBM) since this corporation was formed. The plan’s initial capacity was reported at 500 million cubic meters yearly. We reported in late January that U.S. coal baron, E. Morgan Massey, had backed this firm.

China is optimistic in regards to the nation’s coalbed methane reserves. Two years ago, Xu Dingming, a director of the NDRC’s energy bureau estimated that China’s CBM reserves had been roughly equal to the nation’s natural gas reserves.

In December 2006, China’s Ministers of Finance, Customs and Taxation agreed to introduce tax breaks to corporations which imported gear for the development of coalbed methane assets.

This notice came after it was reported that China’s CBM-utilization had failed to meet the targeted 36 p.c – falling short by practically one-third. Since then, state-owned firms and the government have been intensifying their efforts to speed up CBM exploration and improvement in China’s coal fields.

Over the next twelve months, we anticipate these efforts to escalate CBM improvement to a more extremely seen international stage.

Extra Gamers Coming into China’s CBM Sector

One of the issues in the United States, in accordance with Phil Flynn, is complacency with storage numbers. “Natural gas storage is a buffer against provide,” he said. “But if we have extreme weather this summer season or a protracted, chilly winter, production cannot sustain with demand.” He pointed to the spike following Hurricane Katrina within the summer season of 2005.

The Chinese don’t have this buffer. As a substitute, they are faced with either additional straining the world’s vitality sources by importing natural gas (and crude) or by creating their domestic vitality fields.

The numerous news from Asian American Fuel, a privately held firm which we beforehand lined, is encouraging for others now growing their tasks.

Companies we’ve featured previously – similar to Far East Vitality, Green Dragon Gas and Pacific Asia China Power – have moved their tasks ahead against a really bearish tide. We imagine they are effectively-positioned to follow in the footsteps of Asian American Fuel. Present output is modest at the company’s six check wells at 300 thousand cubic meters, but again, that is a nice begin.

Many North American buyers have not but seemed beyond their borders in developments for natural and coalbed methane gas tasks. The price of natural gas in North America is relatively meaningless in Beijing or Xi’an.

These companies should profit from China’s recent acceleration to obtain extra methane fuel, pure or CBM, to power their autos. The average bus consumes about 70 cubic meters of compressed natural gas per day (CNG). A typical taxicab uses a mean of 30 cubic meters CNG daily.

A powerful selling level for the elevated use of natural gas vehicles: the value of gas. A hybrid automobile, which additionally utilizes compressed methane fuel, cuts the fueling cost by 60 p.c. How would the U.S. consumer feel about paying $1.20 per gallon as a substitute of $3/gallon at the fuel pump? Most likely the identical approach – one cubic meter of compressed CBM fuel is the equivalent of 1.Thirteen liters of gasoline and retails for lower than half.

As we pointed out in late June, establishments have begun investing in this sector. With the following spherical of conferences in North America, through the fourth quarter and early subsequent year, we suspect more institutions ought to take China’s coalbed methane tasks extra oil Refinery Plant seriously. ‘Movie star’ names reminiscent of Boone Pickens, Morgan Massey and others present a consolation level for a lot of cautious investors. However then once more, it’s the pioneers who make the largest cash, if the initiatives materialize.

In early July, W.R. Hambrecht rated Clean Energy Fuels a “purchase” with an $18 value goal. Throughout his recent television look, Pickens noted one other two analysts picked up on the corporate. And we couldn’t agree extra with Pickens, judging from emails readers have despatched us. Pickens thought individuals didn’t actually perceive the story, at first. Now as extra have digested what is happening, Pickens mentioned, ‘they just like the story.’

And we completely agree with Pickens’ feedback to reporters, saying, “We think that (natural gas refueling stations) will probably be very big enterprise in China.” This improvement shouldn’t be in contrast to the expansion of cellular phones in China. The nation skipped the large infrastructure implementation for conventional landlines and zoomed to cell telecommunications. Judging from our communications, and from what others have instructed us, the readability of reception and reliability surpasses the standards in North America.

Building extra NGV refueling stations will assist drive the demand to carry more pure and CBM fuel into China’s distribution community. It is probably a significant trigger to capture both worldwide media and investor consideration for this sector.

While we take natural gas with no consideration in the United States, the Chinese have taken this gas source very seriously and embraced it. By devoting their energies in developing their transportation methods with increased natural gas consumption, the country’s atrocious pollution historical past might be reversed.