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In China gas push, one-size doesn't fit all as CNOOC hires tankers

BEIJING (Reuters) — Local authorities in China should not use a one-size-fits-all approach to implement the country's push to heat millions of homes with natural gas this winter, the official English language paper China Daily said in an editorial on Tuesday.

The comment came as state-owned producer CNOOC said it has leased two tankers off the coast where it is storing an emergency stash of LNG, in an unprecedented, costly step to avoid a heating crisis.

The China Daily opinion and the tankers are the strongest signs yet that Beijing is increasingly worried, just two weeks into the winter heating season, about the unintended consequences of its experiment to convert the northern part of the country to cleaner burning natural gas from coal.    

China made the switch to help clear the smog that blankets the north during the winter and is caused by emissions from home heating systems as well as power plants fired by coal, the country's primary fuel source.

Domestic LNG prices have soared over the past month, hitting record highs this week, as 28 cities have turned on their heating systems and factories have converted to the fuel for the first time.

Last week, two major consuming provinces, Hebei and Shandong, warned of shortages and were forced to cut gas supply to factories, highlighting China's inadequate infrastructure and insufficient domestic output.                          

The China Daily made its warning amid reports that insufficient gas supplies have left some residents without any heating, it said.

"Any measures to run after a 'blue sky,' including the 'gas-replacing-coal' campaign some local governments have launched, should fully consider residents' needs and be tailored to local conditions," said the China Daily.

"They should not be advanced using a one-size-fits-all approach."

The local authorities have "good intentions" by implementing the central government's policy, but it should not be at the cost of some people's well-being and at the risk of their health, it said.

State-owned gas producers are trying to address public concerns about a potential heating crisis a day after the state planner ordered eight regions to "regulate" the gas market.

CNOOC, the country's largest LNG importer, said it has hired two LNG tankers for emergency storage for the first time to ensure adequate supplies and prevent skyrocketing prices.

Analysts said this is an unusual move due to the high cost of leasing LNG tankers, but it is not the first time China has employed the method to cope with a spike in winter demand.

"What's CNOOC is doing is similar to what Beijing Gas did last year by parking LNG shipments near the Bohai Bay in case of a cold spell," said Chen Zhu of SIA Energy.

CNOOC said it aims to have 20 Bcm of natural gas on hand this winter. China's winter gas demand will hit a record 23 Bcm this year, energy consultants Wood Mackenzie estimate.             

PetroChina, which operates the nearby Caofeidian LNG receiving terminal in Tangshan, is also boosting volumes at the 6.5 MMtpy facility, but its supplies are limited by tank space, said a company official.

Separately on Tuesday, the government said PetroChina has started up the third phase of the West-East gas transmission project. The line can carry 30 Bcm of gas a year from fields in Central Asia and the western region of Xinjiang to consumers in the east.             

Reporting by Josephine Mason and Chen Aizhu; Editing by Christian Schmollinger and Tom Hogue

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