China's Beijing Gas charts new direction under helm of Madame Li

Hong Kong and China Gas

03/08/2018 24:00

By Chen Aizhu and Meng Meng
    BEIJING, Aug 3 (Reuters) - Beijing Gas Group's Chairwoman Li
Yalan is guiding the Chinese capital's natural gas distributor
into the highly competitive world of natural gas trading while
still providing fuel to a city that consumes as much gas in a
year as Belgium. 
    Li became one of the few women to head a major energy
company after taking the helm in 2014. She currently leads a
company that distributes 16 billion cubic metres of gas a year,
more than the amount of gas that global trader Vitol moved in
2017.  
    Under Li's tutelage, the firm, part of Beijing Enterprise
Holdings  0392.HK , plans to move beyond gas distribution into
natural gas trading by procuring supplies it can sell to Chinese
end-users. The company last year completed a $1.1 billion
purchase of a 20 percent stake in an East Siberian gas field
owned by Russia's Rosneft  ROSM.NN .
    "If we remain only as a city gas distributor, we'll have
limits in securing supplies," Li, 56, told Reuters in an
interview. "Having control over resources will empower us."
    As part of its foray into natural gas trading, Beijing Gas
is planning to construct a liquefied natural gas receiving
terminal that can regasify 18.25 billion cubic metres a year of
gas along with a storage farm that can hold 2 million cubic
metres near the city of Tianjin, an official from the Tianjin
government confirmed.
    The project would also include a 300-kilometre (188-mile)
pipeline connecting the terminal to Beijing, the official said.
The first phase of the terminal is slated to start in 2021,
pending regulatory approval, and the final cost is expected to
be over 10 billion yuan, the official said.
    The terminal will give Beijing Gas extra supply to trade as
it plans to start a trading desk once the project is
operational, said Li. 
    The investments in the Rosneft field and shale gas assets in
southwestern China, along with the LNG receiving terminal, help
Beijing Gas stand out from other municipalities that have
focused on pipelines and their local markets.
    "Beijing Gas could comfortably live on its city gas
business, but under the leadership of Madame Li, the firm has
developed a global vision that is rare among its peers," said Li
Yao, founder of consultancy SIA Energy.
    The growth that Li is seeking for Beijing Gas directly stems
from the Chinese government's mandated switch to cleaner-burning
natural gas from coal for residential heating and industrial
fuel as part of its fight against air pollution. That policy
caused China's LNG imports to surge, as the country last year
overtook South Korea as the world's second-largest importer.
    
    ROSNEFT DEAL 
    However, piped natural gas will still fulfil crucial parts
of China's needs. Beijing Gas's stake in Rosneft's Verkhnechonsk
oil and gas field gives them access to 3 billion cubic metres of
gas per year through imports on Russia's Power of Siberia
pipeline starting in December 2019.
    "Rosneft didn't know us well at the start...but eventually
the deal factored in Beijing Gas' value that few competitors
could match, direct access to a vast end-user market," said Li.
    Li's career has been intricately tied to securing natural
gas for Beijing ever since she chose the energy industry nearly
four decades ago by picking "city gas" as her university major
since her parents had hoped it would result in a job in a city
rather than the countryside.
    From there, Li gained exposure to the French gas network
during a two-year training stint with Gaz de France in the late
1980s. There she learned the practices of procurement, pricing
and infrastructure necessary for a distribution business and a
model for Beijing Gas to later emulate.
    "That was a huge eye-opener," said Li. "China then had very
rudimentary infrastructure while France was already highly
developed."
    Li parlayed that experience to become in 1993 a leader for
planning China's first major gas pipeline, carrying supplies
from the Ordos basin in northern China to Beijing. 
    She was meticulous in her details, mapping out how many
small restaurants and businesses in the capital needed to shift
to gas from coal for their cooking and heating needs. She also
lobbied the government to remove a ban on gas as a boiler fuel.
    Beijing Gas is now the link between end-users and energy
producers such as PetroChina Ltd  0857.HK  and has invested
billions of dollars over the years in domestic gas
infrastructure controlled by the state-owned company.
    The early cooperation and trust built with PetroChina,
China's largest gas producer and pipeline operator, gave Beijing
Gas a head-start as a strategic partner in nearly all of
PetroChina's major trunk pipelines, a key source of cash flow
for the distributor.
    Li's decades of work and her commitment to the natural gas
industry were recognised with her election to President of the
International Gas Union for a three-year term starting in 2021,
during which China will host the World Gas Conference. She is
the first woman and the first Chinese person to hold the
position.
     

($1 = 6.8421 Chinese yuan renminbi)

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Beijing gas consumption    https://reut.rs/2n5Oy8c
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 (Reporting by Chen Aizhu and Meng Meng; Editing by Christian
Schmollinger)
 ((aizhu.chen@thomsonreuters.com; +8610 66271211; Reuters
Messaging: aizhu.chen.reuters.com@reuters.net))