Xinjiang emerges as major natural gas player

The Xinjiang Uygur Autonomous Region in northwest China has transformed into the premier national energy hub, which holds the country’s largest oil, gas and coal reserves. China, to meet growing demand, must import a large share of its energy resources. However with more enhanced technology upgrades along with substantial regional infrastructure development, Xinjiang can offer more abundant power to the rest of the nation.

According to estimates given by the US Energy Information Administration (EIA), Xinjiang accounts for approximately 40 percent of China’s total natural gas reserves and locals are poised to enter an era of prosperity, but challenges remain ahead.

Upgrading Xinjiang’s natural gas economy

Yes, Xinjiang has increased its energy output ever since the State Council, China’s Cabinet, has launched significant oil and gas projects in the region that started in 2014. The Chinese business news Website, ECNS, reports that Xinjiang is forecast to produce over 30.5 billion cubic meters of natural gas this year; and 14 trillion cubic meters of natural gas reserves remain ready to be tapped in the future.

Yet, Xinjiang remains a sparsely populated area in a rugged mountainous desert zone. Companies engaging in natural gas drilling, refining and shipping have to rely on the most-advanced technical equipment and expertise to raise output to end-users. China’s state-owned oil and gas enterprises – PetroChina, CNOOC and Sinopec – have already taken large stakes for gas exploration in northwestern China and they can pump up capacity further through joint venture projects with foreign-owned energy companies.

East meets West for deal-making

US-based General Electric Corp. (GE) is expanding into southern Xinjiang with plans to build nine small-scale LNG (Liquefied natural gas) plants, each with daily production capacity at 50,000 cubic meters over the next three years. GE has signed Chinese-owned Energas in a joint venture project to process and liquefy gas in remote areas to fill in a limited gas pipeline network and upgrade gas usage efficiency.

“China has abundant resources in natural gas, coal seam gas and shale gas,” Energas Chairman Xie Bing told the news Website, ‘LNG Industry.’ “By implementing GE’s LNG solutions, we hope to ultimately enable high secure utilization of flare gas associated with oil field drilling in Xinjiang.”

Connecting Xinjiang with urbanized eastern China

More multinational energy companies are flocking to Xinjiang just as the State Council announced last June that the regional government expects to pour over $130 billion into local infrastructure projects, such as roads and railways that include investing $2.3 billion from the country’s largest electric utility – State Grid Corp. of China – to construct high-voltage lines in 2015 that transport electricity generated from Xinjiang to the more densely-populated eastern China.

The People’s Daily newspaper quotes Lin Boqiang, energy scholar at Xiamen University and PetroChina consultant, as saying that, “China is where all the growth in oil, gas and coal is going to be coming from. Second, all the imported resources from Central Asia, oil and gas, go through Xinjiang and then get distributed from there.”

Time for ‘New Silk Road’ and ‘Go West’

It makes sense to transfer more energy resources from northwest China to the eastern coastal region that enjoys a strong manufacturing sector. However, surging pollution is forcing Beijing to readjust its macroeconomic policy measures to encourage more Chinese factories to move inland with its ‘Go West’ strategy coupled with President Xi Xinping’s ‘New Silk Road’ initiative, which is expected to build an extensive network of transportation and trade across Asia, the Middle East and Europe.

Xinjiang would not only act as an important transit point for the ‘New Silk Road,’ but can become a pivotal player in the global natural gas game. The energy-rich countries of Central Asia, the Middle East and Russia are building gas pipelines destined for Xinjiang and then the gas flows to the rest of China. It is projected that the pipelines would transmit over 85 billion cubic meters of natural gas annually starting in 2020, according to Beijing Review magazine.

What’s good for Xinjiang is good for the world

Meanwhile, energy companies involved in extracting natural gas from Xinjiang’s three major gas-rich basins – Tarim, Juggar and Tuha– can help China shift away from its reliance on oil and gas imports, while also cashing in on such projects that are often joint ventures between foreign-owned and Chinese corporations. Therefore, Xinjiang is standing as a beacon of hope for the globalized oil and gas industry.