China's Two Big Oil Majors Urge Tax Breaks For Building Gas Storage & Imports

Top officials from China’s two largest oil and gas producers have urged the government to offer tax breaks for the building of gas storage facilities and importing liquefied natural gas (LNG) to help avoid another gas crunch in the winter ahead.

Vice President Ma Yongsheng said the central government should subsidize the construction of underground gas storage, LNG tanks and other facilities.

China National Petroleum Corp (CNPC) [CNPET.UL] President Wang Yilin urged the government to refund value added tax on LNG imports to lower gas costs for consumers.

Members of parliament and the Chinese People’s Political Consultative Conference, the Communist Party’s largely ceremonial advisory body, are encouraged to submit suggestions for future legislation during the current Parliament session.

Their chances of becoming legislation are minimal, but they can form part of future laws. The proposals from Sinopec and CNPC come as the nation looks for ways to increase storage capacity for natural gas to avoid a repeat of this past winter’s heating crisis.

Millions of households in northern China switched from using coal to natural gas for heating ahead of this past winter, leading to sky-rocketing gas consumption as well shortages across many regions.

The fuel shortages over the last three or four months deepened China’s worries over whether it can secure enough gas and LNG supplies in winters ahead.

CNPC’s Wang said China’s gas demand will grow 15 to 16 percent in 2018 and supplies will continue to be tight, according to a transcript of his speech to a parliament meeting session published in CNPC’s official newspaper.

Sinopec’s Kong Fanqun, who heads the Shengli Oil field said a lack of storage facilities also contributed to China’s gas shortages this winter, according to a transcript of his speech sent to Reuters by the Sinopec Group.

The country needs an additional 50 billion cubic meters (bcm) of storage facilities by 2020 to meet its own demand, Kong said. That is five times the size of China’s current gas storage facilities.

Kong asked the government to give gas producers subsidies as well tax breaks to build and operate gas storage facilities.

Both Sinopec and CNPC officials also proposed removing resource taxes on the development of shale gas, coalbed methane, high sulfur gas and tight gas reserves.

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