PetroChina's Kunlun invests billions as cars are converted to gas

Kunlun Energy, PetroChina's gas distribution and infrastructure unit, plans to invest HK$22 billion this year building gas pipelines and liquefied natural gas (LNG) processing plants, as more petrol- and diesel-powered vehicles are converted to run on natural gas.

With the new infrastructure, Kunlun aims to increase total gas sales, both piped and liquefied, by an average of 30 per cent annually over the next five years.

The key to achieving the target was the rate at which vehicles were converted to gas from diesel and petrol, Kunlun chairman Li Hualin said after the firm's annual meeting of shareholders.

"For every 500 million cubic metres of LNG used by vehicles annually, the consumption of 40 million tonnes of diesel and gasoline can be replaced," he said. "This is cost-saving and Kunlun aims to lead the world on this."

Kunlun sold 660 million cubic metres of LNG last year, according to a Sanford Bernstein research report. The mainland produced 260 million tonnes of diesel and petrol last year.

It costs US$70,000 in the US to convert a truck to being natural gas-powered from diesel-powered and US$20,000 on the mainland, the US brokerage's report said. Even taking into account the higher gas price on the mainland, it takes only 21 months to recoup the cost of conversion there, compared to 46 months in the US.

Li said he had visited the US, Japan and South Korea, which were all in the early stages of the adoption of gas for vehicles. He added that none of the firms in those countries could rival Kunlun on operating scale.