New Agreement Targets 20yr Energy Needs

Source: China Daily

Hong Kong and mainland authorities signed a memorandum of understanding (MOU) yesterday that guarantees a supply of nuclear-generated electricity and natural gas to the SAR for the next 20 years.

The MOU also practically rules out the need for a natural-gas terminal in Hong Kong, a decision that a government source said might save local residents about HK$1 billion a year in electricity costs, given the 9.99 percent permitted rate of return for power companies under the recent control agreements.

Chief Executive Donald Tsang signed the MOU with Zhang Guobao, administrator of the National Energy Administration.

Tsang said the Central People's Government will continue to support energy cooperation between Hong Kong and the mainland for the foreseeable future.

According to the MOU, China Guangdong Nuclear Power Holding will renew its electricity-supply agreement to Hong Kong for 20 more years, at a quantity not less than the current level.

And China National Offshore Oil Corporation (CNOOC) will renew its natural-gas supply agreement with Hong Kong for 20 years.

Hong Kong and the mainland have also agreed to conduct a feasibility study on supplying natural gas to Hong Kong via the Second West-East Natural Gas Pipeline.

The central government and Hong Kong will jointly build a natural gas terminal in Shenzhen instead of on Tai A Chau in the SAR, which had been suggested earlier as a means to supply natural gas to Hong Kong.

Describing the MOU as a "breakthrough progress" in supplying natural gas to Hong Kong, Tsang noted: "The stable supply of natural gas from the mainland will greatly reduce the need for Hong Kong to build a natural-gas terminal within the territory".

He added that the result will ease the spending of power companies, resulting in fewer electricity tax hikes.

Secretary for the Environment Edward Yau said Hong Kong could benefit from more natural gas supplied from the mainland in the future.

"More natural gas can improve Hong Kong's air quality and help in the development of clean energy in the long term," he said.

He said that currently, in Hong Kong, power is generated mostly from coal (60 percent), while natural gas (20 percent) and nuclear power (20 percent) account for a significantly smaller portion.

He said the government wants to increase the amount of power generated from natural gas to around 50 percent.

The government source who said taxpayers could save about HK$1 billion by not building a natural-gas terminal in Tai A Chau also said the new agreement will benefit Hong Kong Electric and Towngas. Still, he wouldn't comment on whether the companies will reduce their charges.

The MOU ensures that CNOOC will supply at least 2 billion cubic meters of natural gas to CLP Power each year, the source said.

When the Second West-East Natural Gas Pipeline goes through Shenzhen in 2011-12, the source said, 1 billion cubic meters of natural gas could be supplied to Hong Kong.

He added that the SAR government doesn't have to pay to build the natural-gas terminal in Shenzhen.

CLP Power welcomed the agreement.

"We see the central government's support as a significant and critical new development in ensuring Hong Kong's long-term energy supply, and we welcome this as a constructive (government) initiative," said Andrew Brandler, chief executive officer of the CLP Group.

Replacing the diminishing Yacheng gasfield with new supplies from the South China Sea will partly fill the company's gas shortage, but he said that imports of natural gas will still be needed to meet growing demand.

(By Louise Ho)

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Editor: Chen Minjie