To satisfy China’s surging demand, CNPC, the country’s top oil and gas producer, plans to spend $12.5 billion on new pipelines by 2010. The investment will go towards building 8,000 kilometers of gas pipelines, 3,000 kilometers of crude oil pipelines, and 4,000 kilometers of pipelines for oil products. CNPC’s rival, Sinopec, which supplies more than half of the fuel in China, has also been busy. Since 2003, it has installed over 4,000 kilometers of refined-product lines.

In all, China will install some 25,000 kilometers of new pipelines over the next three years or so. Much of that work will be done by the China Petroleum Pipeline Bureau, an agency that builds 80 percent of China’s oil and gas pipelines and 75 percent of its crude oil storage tanks.

This article will look at the major crude, natural gas, and products pipeline projects that will be built to meet China’s burgeoning demand (both domestic and transnational).

Crude Pipelines

One major crude pipeline commissioned this year was built by Sinopec. The line spans 996 kilometers, from eastern China’s Yizheng city in Jiangsu province, to Changling Petrochemical Corp. in the city of Yueyang, in central China’s Hunan province, via Anhui and Hubei provinces. The line has a maximum crude transmission capacity of 27 million tons per year (540,000 barrels per day) and will transport crude to five major refineries owned by Sinopec along the Yangtze River. The five refineries are the Jingmen, Changling, Wuhan, Jiujiang, and Anqing Petrochemical Corporations. They have a total crude distillation capacity of 22 million tons per year (440,000 barrels per day).

Construction of the line started in October 2004. It is meant to send Sinopec’s imported crude to the abovementioned refineries via the Zhejiang-Shanghai-Nanjing crude pipeline, and also to send crude produced from the Shengli oilfield via the Shandong-Nanjing crude pipeline. The pipeline will be linked with an existing pipeline, joining northern China’s Shandong province with Jiangsu province. The grid will also be linked with Sinopec’s two other crude pipelines, which join the cities of Ningbo with Nanjing and Jinan with Nanjing.

The crude is currently downloaded from the Shandong-Jiangsu pipeline and then shipped to these refineries along the Yangtze River from a port in Nanjing, the capital of Jiangsu.

Transnational Pipelines

CNPC and Sinopec are also planning a number of transnational pipelines to move oil and gas from central Asia and from the Middle East via Burma. The construction of the first such pipeline, linking Atasu in central Kazakhstan to Alashankou in western China (without crossing Russian territory), was completed in December 2005.

The pipeline has a total length of 962 kilometers. China and Kazakhstan jointly provided a construction fund of $700 million. The line has an initial annual crude transmitting capacity of 10 million tons, and will increase to 20 million tons in 2010. CNPC has built a 252-kilometer spur to link the line to its Dushanzi refinery.

China and Kazakhstan will soon sign another agreement on a transnational gas pipeline. The pipeline’s capacity is projected to be an annual 30 billion cubic meters of gas. The first phase of the pipeline, with a capacity of 10 billion cubic meters, is scheduled for launch in 2009 and the second phase, bringing capacity up to 30 billion cubic meters, in 2012.

Meanwhile, CNPC has already started work on the feasibility study for a pipeline which could link Turkmenistan, Uzbekistan, Kazakhstan, and China. It would run from the Amu Darya River in Turkmenistan to northwest China's Xinjiang region. From the Amu Darya, the pipeline could run to Bukhara in Uzbekistan, Alma-Ata in Kazakhstan, and then towards the Sino-Kazakh Atasu-Alashankou oil pipeline. According to an intergovernmental agreement signed by China’s president Hu Jintao and Turkmenistan’s president S. A. Niyazov, China will buy 30 billion cubic meters of natural gas annually for 30 years, starting in 2009.

More ambitious plans are being hatched by CNPC and Russia’s Gazprom to build three gas pipelines from west and east Siberia to China. These lines would each deliver 30 to 40 billion cubic meters of natural gas annually, starting in 2011. The west route would deliver gas from west Siberia to the northwestern Xinjiang region, with the two east routes delivering from east Siberia to the northeastern Heilongjiang province.

Gazprom has decided that Altai, the western route, should be a priority. It would run along the edge of the west highland Ukok plateau, following the 54-kilometer western section of the Russian-Chinese border (the Chinese side is an environmentally protected area). Russia and China discussed gas export from the eastern route as early as 1995. No progress was made until March of this year, when Gazprom and CNPC signed a memorandum of understanding on one of the two proposed east lines.

Another east line – which may overlap Gazprom’s east line, and link the east Siberian Kovykta gas field to northeastern China and farther on to South Korea – has already won approval from China and Korea. But other news suggests that the Kovykta field start-up may be delayed, which would clearly affect the pipeline construction. Russia has further delayed its decision on this line to consider how to integrate the project with its unified gas supply system. This hesitation reflects Gazprom’s view that the Chinese market might be better served by gas from Sakhalin in far eastern Russia, and that Gazprom is keen to ship the Kovykta gas west, toward Europe.

Whatever option is pursued, CNPC is ready to work with Gazprom within the framework that they set up last year. That framework commits the two companies to cooperate in the natural gas sector. It would be impossible to start building the four transnational gas pipelines simultaneously, although they have similar schedules (around 2010) and capacities (30 billion cubic meters a year).

In the south, China approved the feasibility study of the Sino-Myanmar pipeline this year. Construction of the 8 billion yuan ($1 million) project is expected next year.

With the pipeline, Middle East oil can be shipped to Myanmar's Sittwe Harbor, where oil will be piped through Myanmar to reach Kunming via a 900-kilometer pipeline.

Natural Gas Pipelines

China will extend the west transnational pipeline from Kazakhstan, Russia, or Turkmenistan to southern China. Known as the second West-East gas pipeline, the extension will span 7,000 kilometers from Xinjiang region to southern China's Guangdong province, via Sichuan and Hunan provinces.

The first West-East 4,000-kilometer gas pipeline started commercial operation at the end of 2004. The pipeline originates from the Tarim gas field in Xinjiang and runs through the provinces of Gansu, Ningxia, Shaanxi, Shanxi, Henan, Anhui, Jiangsu, Zhejiang and Shanghai, to its final station in the town of Baihe. To help satisfy China’s rising demand for natural gas, CNPC plans to invest $540 million in order to boost the capacity of the West-East pipeline, from 12 billion cubic meters to 17 billion cubic meters per year.

The first West-East gas pipeline will be linked with its second Shaanxi-Beijing pipeline to ensure sufficient supply to the capital. The second Shaanxi-Beijing gas pipeline has an overall length of 851 kilometers and covers Beijing, Tianjin, Shaanxi, Hebei, and Shandong. It will hit a contractual gas consumption of 4.67 billion cubic meters by 2010. The 918-kilometer first Shaanxi-Beijing line started operation in 1998.

In Sichuan basin, CNPC is now operating a 1,347-kilometer gas pipeline linking reserves in Zhong County to the market in Wuhan city. The line has an annual throughput capacity of 3 billion cubic meters. Sinopec, a minor gas player in China, is considering building a pipeline from its major Puguang discovery field to the markets in the Yangtze River Delta region around Shanghai, because of higher local demand.

In another development, China has started building its first pipeline to transport coal-bed methane in northern China’s Shanxi province. The line will stretch over 145 kilometers from Jincheng city to Houma city via Qingshui, Yicheng, and Quao counties. The gas will be largely for household and commercial use, with an initial throughput of 300 million cubic meters per year, and by 2010 expandable to from 500 million to 1 billion cubic meters. The local CBM developers will build branch lines after the trunk line is completed by the middle of next year.

Over the long run, China will build 10 pipelines in central, northern, and northwestern China to move CBM. The scheme will require $375 million to complete over the next three years. The 10 pipelines, each with an annual throughput capacity of 800 million to 1 billion cubic meters, will have a total length of 1,390 kilometers, stretching from CBM deposits in northern and northwestern China's Shanxi and Shaanxi provinces to markets in central and northern China. The decision to build the pipelines comes at the same time as leading CBM developer China United Coalbed Methane Corp.’s larger plan to accelerate development of up to 10 billion cubic meters of CBM per year by the end of the decade.

Oil Products Pipelines

As China’s largest refiner, Sinopec owns and operates most of China’s oil products pipelines. Last year, the company announced that it would reinforce its market dominance in central China by building four oil products pipelines in Jiangxi. They are the Jiujiang-Nanchang-Zhangshu pipeline, which will source oil from Sinopec's Jiujiang refinery in Jiangxi; the Quzhou-Shangrao pipeline, which will be linked up with the company's Hangzhou-Jinhua-Quzhou pipeline and source oil from Sinopec's refineries in the Yangtze River Delta; the Longyan-Ruijin line, where oil will reach the Jiangxi city from Sinopec’s Fujian Refinery through the Fuzhou-Longyan pipeline; and the Zhuzhou-Pingxiang line, which will hook up with the Changsha-Zhuzhou-Xiangtan oil pipeline and source oil from Sinopec's Yueyang Refinery, Changling Refinery, and Baling Petrochemical.

In northern China, Sinopec has started construction on a few oil infrastructures in the Beijing area, to improve the logistics of crude and oil production storage and transportation. These include a 230-kilometer crude pipeline linking the port city of Tianjin and Sinopec Yanshan Petrochemical Corp. in Beijing via Hebei province, a 600,000 cubic meter crude tank farm (3.8 million barrels) in the Nanjiang port of Tianjin city, and an 800,000 cubic meter crude tank farm (5 million barrels) in the Dagang region of Tianjin. These pipelines will supply crude to four Sinopec refineries in northern China.

Sinopec will soon start operation at its 1,135-kilometer oil products pipeline, linking Zhanjiang in the west of Guangdong to Shenzhen, a city bordering Hong Kong. Costing 3 billion yuan ($379 million), it has an annual capacity of 9.5 million tons (190 barrels per day). It will be connected to another Sinopec pipeline in use since last year. It pumps oil products from its second-largest refinery, Maoming, in Guangdong, to southwestern provinces such as Guizhou and Yunnan.

The Maoming pipeline is China's longest oil products pipeline, spanning 1,691 kilometers through 37 cities and counties, starting from Maoming city in southern China's Guangdong province and terminating at Kunming city, the capital of southwestern China's Yunnan province. The line’s construction, started in September 2003, cost $422 million, and has an annual transport capacity of 10 million tons of gasoline and diesel to southwestern Chinese provinces. Before the pipeline was built, Sinopec supplied oil products to southwestern China from Maoming via rail cars.

Sinopec is also considering building an oil products pipeline linking refineries in Shandong province to the market in northern Jiangsu and Anhui provinces, all located in the east. The proposed $110 million pipeline will span 720 kilometers through eight cities in Shandong, Jiangsu, and Anhui, terminating in Suzhou city, and will largely carry gasoline and diesel. The rationale is to transport Shandong’s oil products surplus to the markets in northern Jiangsu and Anhui, which lack any significant refineries.

CNPC is also on the move. The company plans to invest $1.5 billion in two oil products pipelines: one from Lanzhou in the northwest Gansu province to Changsha in the south-central Hunan province; and one from Jinzhou in the northeast Liaoning province to Wuhan, in the central Hubei province.

The two pipelines will help ease the company’s logistic constraints in sending oil products to central and southern China. The company has finished the feasibility study of the two lines and is waiting for approval from the central government.

The construction of the Lanzhou-Zhengzhou section of the Lanzhou-Changsha pipeline is currently expected to start first. The 3,375-kilometer section is designed to transport 8 million tons of oil per year.

Last year, CNPC started the operation of its 1,858-kilometer oil products line (which has a designed capacity of 200,000 barrels per day) from Urumqi in northwestern China’s Xinjiang to Lanzhou. By 2020, CNPC’s new oil products pipelines, combined with its existing ones, will total 9,200 kilometers, with a total transport capacity of 30 million tons.

The scope of the current pipeline frenzy boggles the mind. All told, China is laying enough pipe to span the distance from New York to Los Angeles more than six times. And it will install all of that steel over the next three years or so. Further, the country’s pipeline infrastructure development plan is still in its early stages. As China’s thirst for oil and gas continues to grow, expect the announcement of yet more pipeline projects.