1、 Energy mix and its change in China
China is a major country for coal production with coal predominated in technical installation, energy policy and energy mix for many years. By 2000, the city gas supply amounted to 152 ×108m3 ; natural gas supply to 82 ×108m3 and liquidized gas supply to 10.54 ×106tons. In cities, the overall length of fuel gas pipeline is up to 89,458km,including a total length of natural gas pipeline 33,655km,that of artificial gas 48,384 km and that of LPG 7,419 km. For the populations of about 176 million as gas consumers in cities, artificial coal gas accounts for 23 %, LPG for 63 % and natural gas for about 13 %.

At present, in Chinese energy consumption, the share of coal is 73.5 % while those of oil and gas are 18.7 % and 2.2 % respectively, leaving a large gap compared with 27% for coal, 39.5% for oil and 23.5% for natural gas at average in the energy consumption worldwide.

Because of the unreasonable energy mix, high cost had been paid when China kept a rapid economic development over the recent twenty years. The first problem is the serious air pollution. As a rough estimate, SO2 emission is up to 27.3 million tons per year, leading to acid raining over about 30% to 40% of the land countrywide, smoke and dust emission about 21 million tons per year and CO2 and NOx emission five million tons per year. In the world, five of ten cities with serious pollution are in China , which increases to eight recently. Coal is the major source for air pollution. Moreover, it requires large investment and has lower heating efficiency to use coal as energy. As the living level is enhancing and the awareness of environmental protection is improving, the demand for clean energy, especially for natural gas is rising increasingly. Natural gas utilization will lead to a reduction of NOx and SO2 emission by 90% and 98%, and a significant reduction of CO2,smoke and dust emission.

In order to maintain a sustained rapid and coordinated development of economy, Chinese government has adopted a series of measures for energy mix change and made development and utilization of natural gas resources as an important strategy for adjustment of energy consumption structure. Great efforts have been made for the adjustment of energy consumption structure and an energy production system with coal predominated and multi-energy complemented has been formed gradually from a single structure of coal dependence. As estimated, the primary energy production will grow to 1.32 billion standard tons of coal by 2005, 228 million tons more than that in 2000. The coal production will be 1.17 billion tons, rising about 172 million tons with an annual growth of 3.23% at average; crude oil 165 million tons, roughly the same with that in 2000; natural gas 50 billion cubic meters, increasing 23 billion cubic meters with an annual growth of 13.9% at average; Hydro-electricity 115.8 billion KWh, increasing 43.6 billion KWh with an annual growth of 3.23% at average; and nuclear power and so on 60 billion KWH, rising 43.6 billion KWH with an annual growth of 29.67% at average.

It is estimated that, the share of coal in energy mix will decrease to 63 % and that of clean energies such as natural gas and hydro- electricity will grow to 17.88% in 2005. It is planned that the share of natural gas will grow to 7% in 2010 and about 10% in 2020.

2、Prediction of oil and gas demand in China
China is a major country both with abundant energy resources and large energy consumption. Its primary energy production accumulated to 10.9×108 standard tons of coal, ranking in the third place in the world; the primary energy consumption accumulated to 12.8×108 standard tons, ranking in the second place(both from statistics in 2000) in the world. Additionally, it can be seen from these figures that the energy consumption in China is more than the production with a remedy of import. The import is mainly crude oil with a small amount of LNG and LPG.
China has 940 ×108 tons of overall petroleum resources, including onshore 694 ×108 tons(accounting for 73.8 %)and offshore 246×108 tons(accounting for 26.2 %). The natural gas resources are 38.14 ×1012 m3 , including onshore 29.9 ×1012 m3(accounting for 78.1 %) and offshore 8.15 ×1012 m3 (accounting for 21.5 %). The result of the latest exploration has shown that the total resources in the whole country is up to 1068 ×108 tons.

The annual oil production was stable at about 160 ×108 tons for quite a long time. However ,as the national economy is developing and the oil demand is increasing, oil consumption in China at present ranks in the third place in the world, just behind U.S.A. and Japan, accounting for about 6% of the total consumption in the world. From the fact, it is expected that, in the next decade, the Chinese oil consumption will be 2.65×108 tons in 2005 and about 3.25 ×108 tons in 2010. It is estimated that the Chinese oil import will increase , ranking as the second major oil importer, just behind U.S.A. in several years.

China possesses abundant natural gas resources, of which 26 ×1012 m3 are distributed in Tarim, Qaidam, Shan-Gan-Ning and Chuan-Yu basin, accounting for 86.7% of the total in the country. At present, gas reserves discovered in Ordos, Zungger, Song-Liao and Bohai gulf basins have been increasing significantly. Suliger gas-field located in Yikezao county, Inner Mongolia,is a world -class gas fields with a proven OGIP 6025.27 ×108 m3.

At present, China possesses 38 ×1012 m3 natural gas resource. As of 2000, China had proven OGIP 2.56 ×1012 m3. It is expected that the annual natural gas production will grow to 500 ×108 m3 in 2005. According to the urban and rural construction and development plan during the “Tenth of Five Year Plan”, the annual natural gas consumption will be up to 170 ×108 m3 for a popularization rate of 86% in urban residents to use gas as fuel in 2005; 680 ×108 m3 for 94% in 2015. The supply of natural gas can’t meet the urban demand, therefore, LPG will develop respectively to meet a demand of 18.7 ×106 tons per year in 2015. However, artificial gas supply will decrease gradually due to the development restriction in environmental protection and economics. In 2005, the supply of natural gas and LPG will increase 90 ×108 m3 and 3.4 ×106 tons per year respectively with a popularization rate 92 percent of urban residents to use gas as fuel. In order to meet the rapidly growth of natural gas demand in domestic market, natural gas import will increase gradually after 2005. It is expected that the natural gas demand in China will be up to 637 ×108 m3 per year while the gas supply will be only 500 ×108 m3 in 2005; gas production can grow to 700-800 ×108 m3 per year with a maximum shortage of 511 ×108 m3 in 2010; and the shortage will be 1000 ×108 m3 in 2020.

China is planning to accelerate the construction of five natural gas bases in “west, east, north, south and central”. “West” refers to the project of “west to east gas transmission project”; “east” to the development of gas resources in East China Sea with realization of offshore gas landing in 2004; “south” to acceleration of natural gas development in the western Sichuan at a growth rate of 223 ×108 m3 to realize a leap development; “north” to acceleration of development of natural gas resources in the northern Ordos to join the gas supply to east China; “central” refers to the further development of the gas resources in Zhongyuan oilfield to expand the gas supply to Shandong market. Therefore, in the new century, as an emerging industry, the Chinese petroleum industry will have a broad prospect and a significant development of pipeline construction is still to come in China.

3、Oil & Gas pipeline construction trend in China
As the energy mix is adjusted and the awareness for environment protection is enhanced , the demand for natural gas has been increasing greatly in recent years. The growth of the natural gas share in Chinese energy consumption has surpassed that of oil. In the coming ten to twenty years, natural gas development and its pipeline construction will make great progress, gas pipeline construction will be predominant in pipeline construction and grow rapidly. It is reported that petroChina will invest 200 billion RMB to construct oil and gas transportation pipe network in the coming decade.

In China, oil and gas are supplied domestically and abroad. First, they are supplied domestically. Compared with developed countries, the exploration rate for oil and gas in China is lower, but reserve/production rate is very high. Therefore, the probability of discovery for large gas field is high, but the discovered reserves have often not been produced. In general, China has a favorable context in natural gas resources. As exploration is intensified, more good news will be heard following the discovery of Sugerli gas-field in Inner Mongolia. The second channel for gas supply lies on import from the peripheral countries, where half of the gas resource in the world exists.

The project of “West to east gas transmission” not only raised a prologue for the development of the western China, but for the change of energy mix in China. Following the prologue raising for west to east gas transmission project, Sino-Russia pipeline will be initiated before long. As expected, Sino-Rusia pipeline will enter China through Manzhouli in Inner Mongolia to gasify Inner Mongolia, Heilongjiang, Jilin, Liaohe, Hebei and Shandong provinces. Meanwhile, as required, it may introduce natural gas from west Siberia and Turkmenistan. We believe that gas transportation pipeline in China will be “the late comers surpassed the old-timers” in next ten or twenty years in terms of either pipeline length or technology and management, entering the rank of advanced systems globally.

4、General of Chinese pipelines under construction and to be constructed

Crude oil transportation pipelines
The imported oil required by China comes mainly from Middle-East and the western Africa through long distance ocean transportation. Since the oil price depends on the tonnage of the tanker, the larger an oil tanker is, the lower the freight is. Generally, the freight per tonne of a 250000 t oil tanker is 60% of that of a 130000 t oil tanker and 30% of that of a 80000 t oil tanker. Since there is few deep water harbor for oil unloading, tankers with small tonnage are usedby the larger refineries in east China for oil transportation and transfer is needed, resulting in high freight. There are two good harbors: Cezidao and Daxiedao in Zhoushan area of Zhejiang province. It is expected that an oil transportation pipeline with an annual capacity of 20 million tons will be completed before 2010, which will start from the deep-water dock of Daxiedao, pass through Zhenhai Petrochemical, cross Hangzhou bay and Chenshan oil storage battery to Nanjing Refinary directly, then pass through Yangtze River and terminate finally at Yangtze Petrochemical; another pipeline with a delivery capacity of 20 ×106 t/a will start at the deep water harbor in Cezidao and reach Shanghai ( Jinshan) refinery through 100 km and some subsea pipeline and forward to Gaoqiao refinery in Shanghai.

The pipeline from Kazakhstan to China is under construction, which has a designed throughput of 20 ×106 t, design pressure 6 MPa, using X60 steel pipe with wall thickness of 7.9、8.9、10.5 and 10.7; it is possible to construct a pipeline with a delivery capacity of 20 – 30 ×106 t as designed from east Siberia to Beijing, passing through Erlianhaote with 718km pipeline laid in China; SINOPEC is planning also to construct some oil transportation pipelines such as from Tianjin to Yanshan Petrochemical, Changzhou to Tianjin, Linyi to Puyang and some oil import pipeline from Ningbo to Shanghai and Nanjing. Also, Sinopec also intends to or is undertaking some revamping /expanding engineering on Dong-lin dual pipeline, reaching an annual capacity of 1800 million tons, on Lu-Ning pipeline for an annual capacity of 20 million tons and on Zhong-Luo pipeline. These oil pipeline constructions will further improve the oil pipeline network and promote the economic development in China.

It is estimated that an oil pipeline from Yiekuzike,Russia, which will enter China through Manzhouli, Inner Mongolia, will be completed before 2005. It will reach directly the initial station at linyuan of Qing-Lin pipeline.Thus, the oil pipeline network in East-north China will not be affected by the production decrease in Daqing oilfield and keep fully throughput.

Natural gas pipelines

In 2003, natural gas pipeline construction is the most hotspot in future pipeline construction in China since large numbers of gas pipelines will be constructed in the future period. Following the project of “west to east gas transmission”, China will initiate the project of “Russia gas to south”. It is said that the project will cost more than $10 billion U.S. D., known as the second “Three Gorges project”, and will be completed by the end of 2007 or early 2008. It is of great political and economical significance for the development of the north-eastern part and around Bohai area in china. Recently, Russia, China and South Korea had a discussion on the gas pipeline construction, which will be laid from Yiekusk state, East Siberia of Russia, pass through North Korea and terminate at Pingze in the western South Korea. According to the agreement, a joint preparetary survey will begin and the feasibility study of the project will be completed by July, 2003 for governmental approval.

The construction of Zhong-Wu natural gas pipeline ( from Zhongxian to Wuhan) with a length more than 700km has been approved by the authority, the basic design has been reviewed and the preparation work is undertaken positively. It is estimated that the construction will commence the later half of this year and completed in 2004. This transportation pipeline will supply natural gas to Hunan and Hubei provinces.

In order to expand supply scope of gas produced in north Shaanxi to support the hosting of “2008 Olympic Games” in Beijing, an expansion project for gas entering Beijing from north Shaanxi will start this year in Beijing and the completion engineering for the second long distance pipeline for gas delivery into Beijing from north Shaanxi is planned and prepared. The budget of project investment is over 300 million RMB. As a result, the gas transportation capacity from Shan-Gan-Ning to Beijing will grow to 18 ×108 m3.

Now, PetroChina’s gas import project from middle Asia is under negotiation tensely. Upon the eventually establish of the project, a more than 2000 km pipeline will be constructed from Middle Asia to connect with the west to east gas transmission pipeline.

The gas transmission pipeline from Changqing to Huhhot is proposed by Inner Mongolia West Gas Ltd. Co. to meet the natural gas demand in Huhhot, Baotou and Orduos. It is the fifth gas Transmission pipeline following Shan-Jing, Jing-Xi, Chang-Ning pipelines as well as the first pipeline laid in Inner Mongolia. It initiates in south at the No.2 natural gas purification factory of Changqing oilfield and n terminates at Huhhot city with a total length of 497 km with four branches with an overall length 24 km. The pipeline has a diameter ofΦ457ｍｍ and passes through 66 villages, 37 towns, 3 counties and 3 cities. Along the whole pipeline, roads at places, rivers at places, railways at places and Yangtze River at one place are passed through. Total investment is estimated as 843.66 million RMB. The pipeline construction will be completed by the end of 2003 to have a capacity of 9.5 ×108 m3, which will increase to 13×108 m3 through secondary boosting.

LNG resources will be imported first to Zhujiang Delta Region in Guangdong in order to improve the status of energy resource shortage for the rapid growth of economic development in the east-south coastal area. As a pilot test of LNG project, the early stage of pipeline construction has started completely (the pipeline engineering Ltd. of pipeline Bureau, CNPC has won the bid for the conceptual design and basic design). It composes of one trunk pipeline(from Shenzhen to Guangdong) and two branches with an overall length of 327km and an estimated investment 1.2 billion RMB. It will be completed in 2005 as estimated.

In order to transport natural gas from offshore to onshore, China will construct the gas transportation pipeline network in Jiaodong pennisular, Shangdong province, Donghai gas pipeline from Chunxiao gas field for gas supply to Zhejiang and pipelines from gas fields in South China Sea to Hainan and Guangxi etc. To realize the “Blue sky and green water project” in Shandong, SINOPEC will also construct a 136km pipeline from Jinan to Zibo, which is designing at present. These constructions of pipelines will strongly promote the development of related industries and ensure the rapid growth of gas markets in cities.

Oil product transportation pipeline
The construction of oil product transportation pipeline is another measure to realize the sustainable development and west development strategy in China. China will construct an oil product transportation pipeline from Maoming, Guangdong province to Kunming, Yunnan province besides the completed Lan-Cheng-Yu oil product transportation pipeline. It is planned to use a reduced pipeline with diameters changed from 500mm to 700mm over its total length 2000km. At present, it is at the stage of pre-feasibility study.

5、Trend of steel consumption in Chinese oil and gas pipelines

According to the Chinese energy planning, 70 million population in 148 cities will use natural gas by 2005 while 150 million population in 270 cities in 2010. For gas pipelines in cities, the diameter of trunk line is 400～1000mm while that of branch 114～323mm over a total length of 7000km. Gas pipeline network is developing rapidly. In the whole country as divided into 6 districts for pipeline network planning, including western, north-eastern, Chuan-Yu-Xiang-E-Gan, Yangtze River Delta area and around- Bohai area, the diameter of pipeline is 300～800mm. By 2010, more than 140 thousand km pipelines with a total weight up to XXXX tons will be constructed additionally, including O.D. XXXXX 87 thousand km, XXXXX O.D. 43thousand km and O.D. XXXXX 14 thousand km.

Research and development on piping steel in China began during the “Sixth five year plan” period. It developed slowly in the early time. Through technical revamping and innovation in metallurgical, petroleum equipment & pipe rolling and construction sectors over nearly 20 years, high quality and high performance piping series products have been produced. Currently, China-made grade XXXX pipes are used partially or completely for pipelines under construction in China, especially the construction of the west to east gas pipeline, which promoting the development and application of grade XXXX piping steel in China. In general, however, no mater in rolling of piping steel, particularly rolling of wide and thick sheet, or the fabricating of spirally submerged arc welded pipe (SSAW), longitudinaly submerged arc welded pipe (LSAW) and pipe bended by induction heating, the technical level in China has considerable gap with that in the world.

In the overall investment for pipeline construction, the cost of steel pipe accounts for a large percentage. Therefore, it is very important to select steel pipe reasonablly. The trend of steel pipe use for oil and gas piping can be discussed as follows in light of oil and gas pipeline construction practice in China and abroad.

As estimated, gas transportation pipelines will adopt primarily grades X65、X70 steel pipes, maybe grade X80 steel partially.

Except the project of “west to east gas transmission”, which uses grade XO steel, the pipelines under construction or to be constructed such as Chang-Hu pipeline, Hang-Hu pipeline, Zhong- Wu pipeline and Shaan-Jing pipeline will primarily use grade XXXX steel pipes. The Sino-Russia gas transportation pipeline to be planned for construction(total length of more than 4000km, entering China at Manzhouli in Inner Mongolia to Shandong, passing through Heilongjiang, Jilin, Liaoning and Hebei, with diameters of 1016、1219 and 1420mm within China ),the sales pipeline to be laid after development of Sugeli gas field in Inner Mongolia and the gas pipelines from Turkumanstan and West Siberia to China to be considered later will adopt XXXX grade steel pipes primarily, maybe XXXXX grade steel pipes partially.

For long distance and high pressure gas pipelines with large throughput, spirally submerged arc welded Pipe (SSAW) will be used in Class I area and longitudinally submerged arc welded Pipe (LSAW) in Class II, III and IV area. This method is expected to be adopted in the future.
The steel pipes used for oil pipelines are mainly grades X60 or X65. Also, SSAW pipes will be adopted increasingly for oil pipelines.

The dependency on oil import in China will be increasing in the near ten years. In 2000, the crude import was about 70 million tons and will likely increase to 150 million tons in 2010. Since most of oil is imported by sea, it tends to lay oil pipelines from harbors to refineries in hinterland, e.g. Lu-Ning pipeline.

The steel used for oil product pipeline is estimated to be grades X52 to X60 mainly. In view of economic effect, oil product pipelines tend adopt ＥＲＷ ?? steel, if allowed by the diameter, because of the small diameter.

Most of steel pipes used for oil and gas pipelines has still depended on imported grade ＥＲＷ steel primarily.