At the end of March 2016 in Hong Kong, China Petroleum & Chemical Corp., also known as “Sinopec,” announced that it has plans to change many aspects of its business to reflect China’s changing energy production goals.
Currently, Sinopec extracts a large volume of coal for use in energy generation. Yet, after rich gas pockets were found in Sichuan Province and in Mongolia in the Erdos basin, China decided that it could finally reduce coal consumption. In the State Council’s energy development plan for 2014 to 2020, China revealed that the ready availability of natural gas has prompted a decision to increase the country’s gas usage from 6 percent to 12 percent by 2020 while heavily decreasing its coal usage. This decision falls in line with growing environmental worries as China’s air pollution days, especially “Red Alert” days, have increased over the past several years with increased coal usage.
Sinopec will double its natural gas output to meet the growing demands by both citizens and people around the world for cleaner energy generation methods. The company’s Chairman, Wang Yupu, explained on Wednesday, March 30, that the costs of extracting crude oil, another resource commonly used in energy generation, also prompted this decision. Although crude prices came in 6.5 percent higher that day than the standard in a long time at $39.69/bbl in Britain, Sinopec can’t make a profit unless the prices are at $60/bbl.
Sinopec believes it can afford the investment in extraction and storage facilities and pipelines so that the company can increase its 20.8 Bcm gas output for 2015 to 40 Bcm with 500 MMcm of methane extracted from coal beds, 10 Bcm of gas from shale and 29.5 Bcm of natural gas extracted from other areas.