August 2, 2018 / 11:10 PM / 2 months ago

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

BEIJING (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 meters 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, 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.

“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 meters a year of gas along with a storage farm that can hold 2 million cubic meters 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 meters 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 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.

Reporting by Chen Aizhu and Meng Meng; Editing by Christian Schmollinger

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