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Opportunities And Challenges For Pipeline Industry In China

27th January 2014
Gao Deng

Gao Deng is the founder of  Gaodeng Pipe Co. Ltd. With 20 years of Industry experience, in the manufacturing and supplying of steel pipe fittings for oil & gas, shipbuilding, construction, and aviation sectors, spreading clients across the Middle East, Asia, Europe, and America.

Posted: 
27th January 2014
In this post, we would be taking a look at some of the basic opportunities and challenges that confront China’s pipeline industry in terms of international trade and infrastructure development and meeting the growing internal energy demands.
Chinese pipeline

The pipeline industry caters to some of the most driven and robust industries all around the globe. Sectors - like oil and gas industry - that run national economies are crucial to any country’s growth and make heavy utilization of a variety of pipes in running their day-to-day operations. It is only natural for the pipeline industry to keep coming up with technologically superior and innovative products from time to time in order to keep up with the growing demand of other dependent industries.

 

Development of infrastructure in urban and rural areas also relies on the pipeline industry to a great extent. A good network of sturdy and robust pipes in and around cities and villages ensures that the inhabitants live a lifestyle that is free of hassles and offers convenience. Pipelines are used for transporting large quantities of oil, gas, fuel, water and even toxins that are released by factories in the form of effluents. Therefore, although a well-functioning grid of pipelines provides people with convenience, it is also a challenge to handle them with care. 

 

Pipelines are not just laid within a city, but across countries too. For example, the Central Asia – China gas pipeline (also known as the Turkmenistan–China gas pipeline) is a natural gas pipeline from Central Asia to Xinjiang in the People's Republic of China.

 

China and Russia

The year 2013 witnessed what is being perceived as “one of the world’s biggest long term oil supply contracts.” As China and Russia signed several energy agreements, which are speculated to be worth more than $600 billion, the former is said to have become the biggest buyer of Russian crude oil in recent times. If that wasn’t enough, there’s more – Gazprom, the Russian gas industry giant, has also made an agreement with the China National Petroleum Corp. that promises China 30 years of gas supply 2018 onwards.

 

China and Canada

Chinese companies have already made their way to Canadian oil sector with a $3 billion pipeline that would carry oil sands.  This move of Petro China Co. has been followed by other Chinese companies such as China Petroleum & Chemical Corp. and CNOOC Ltd., which has struck a $15.1 billion deal to acquire the Canadian company Nexen Inc.

 

China and Kazakhstan

A 2,228km pipeline already runs from China (China National Petroleum Corporation) to Kazakhstan (KazMunay Gas) for transporting Kazak oil to China. Countries like Kazakhstan, Turkmenistan and Uzbekistan have experienced steady fiscal growth over the last few years due to China’s willingness to fund billions of dollars in pipeline projects and infrastructure developments. This success has encouraged neighboring countries such as Azerbaijan, Kyrgyzstan and Tajikistan to try and replicate this success with their economies by shaking hands with the energy-breathing dragon.

 

China and Myanmar

Work on the Myanmar-China natural gas and crude oil pipelines was completed in October, 2013 and that has added another milestone to China’s pipeline industry growth story. The pipelines enable China National Petroleum Corporation to import natural gas to China, while also supplying gas to Myanmar. The gas pipelines are expected to bring down China's energy import costs as well as diversify its import routes. The Myanmar-China crude pipeline will reduce the reliance on the conventional shipping route, hence securing China's energy security.

 

Domestic and Interstate Pipelines

The rapid urbanization and industrialization in China has been hugely supported by its pipeline industry.  The China National Oil and Gas Exploration and Development Corp (CNODC) has taken up huge gas pipeline projects to cater to the growing energy needs within China. Similarly, in order to avoid a short supply and to reduce dependency on a single supplier, China has started constructing major oil and gas pipelines on alternative routes.

 

The Challenges

As the demand for energy grows across the world, it has had an indirect effect on demand in the pipeline industry as well. There is tremendous scope for growth in this sector. However, along with opportunities, come challenges as well, the top 3 of which are as follows - 

  • Installation: Whether the pipes are fixed or floating, they come with their own set of challenges during the installation process. It is a dangerous procedure and requires necessary risk management control and analysis before the installation begins.
  • Detecting and Prevention of Leaks and Spills: More often than not, pipes carry hazardous substances/materials, which if not handled properly can pose as a serious threat to the lives of millions. Since, it is rather difficult to detect leakages and pilferage, it can turn out to be a risky affair.  
  •  Replacement: Replacement of existing oil and gas pipelines can be a very time consuming and slow process, what with the detailed precautionary and safety measures to be worked out and implemented. The cost incurred in this process is also very high.

 

To Conclude

The above mentioned opportunities and challenges provide a gist of the road ahead for this industry in China. Managing operations in every industry has its own advantages and pitfalls. The drivers of national growth and development of a country need special policies and efforts for its own optimal technological and operational evolution.