Announcement of The World Bank's Environment Friendly Energy Project for the Sichuan Province in China on March 18, 1994

FOR IMMEDIATE RELEASE )World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. *Telephone: (202) 477-1234 IBRD News Release No. 94/69EAP Contact: Erin Burns (202)458-2210 External Affairs - East Asia & Pacific Region Environment-friendly Energy for China's Sichuan Province Washington, D.C., March 18, 1994 -- A $945.2 million project will help fulfill China's natural gas potential in Sichuan Province, one of the poorest provinces in the country, but rich in natural gas deposits. The project will develop new gas fields, rehabilitate old wells and improve the gas transmission and distribtution network. "During peak years of the project, natural gas production in Sichuan Province will be double what it would have been without the project," according to Selina Shum, World Bank task manager. Lowering Greenhouse Gases and Acid Rain A World Bank loan of $255 million was just approved in support of the Sichuan gas development and conservation project. "The project will help eliminate one of the major bottlenecks to economic growth in Sichuan, an acute shortage of power," Ms. Shum says. "It has the added benefit of providing clean fuel, helping to alleviate another pressing concern -- pollution." Increased natural gas production will prevent the burning of 2.9 million tons of coal each year, lowering emissions of greenhouse gases, acid rain and reducing the risk of respiratory disease in Sichuan. The project also contributes to the first-time use of natural gas in electricity production in Sichuan -- a natural gas shortage and rationing prevented its use in power generation in the past. Turning to Cleaner, More Efficient Energy Conwnecial Energy Production in Chim "China's remarkable economic growth 48.2 over the past decade has relied heavily on the 1991 199.1 use of coal in commercial energy production," Ms. Shum says. "In the past, technical and 1985 OR financial constraints prevented a fuller development of the country's natural gas i9 Z reserves. While China must continue to rely predominantly on coal for power, at the OfOd.iI) margin they are turning increasingly to the a cmi a oi E c.. U IdOpme much cleaner and more efficient use of natural gas." Sichuan Province is the major repository of natural gas reserves in China. To develop the province's natural gas potential, the project will finance drilling of 100 wells, construction of surface facilities for gas gathering, dehydration and desulferization and seismic survey and interpretation activities. Also included is the rehabilitation of 190 old wells in order to increase SPA Gas Pruui 19 - 2015 their output. In addition, the Sichuan Petroleum 7 Administration's (SPA) gas transmission system will be expanded and their old transmission and distribution system will be environmentally upgraded to 2 reduce leakage. These activities will yield an additional 68 billion cubic meters of gas between 1995 5 wMas.t O was, and 2015. Part of the Chinese Process of Reform The project takes place within the broader context of economic reform throughout China and the Government's committment to restructuring the oil and gas sector. The project will support the first phase of this in Sichuan Province, including transforming SPA and the China National Petroleum Corporation (CPC) into joint-stock companies and introducing a commercial accounting system into their day-to-day operations. The Government is also pursuing a pricing and allocation system that reflects actual costs and consumer spending patterns. According to Ms. Shum, "this project is part of an ongoing process -- put in motion by the Chinese Government -- to progressively reform the management, pricing and allocation of natural gas, and will promote the project's sustainability." The project also includes technical assistance and training for policy reforms and implementation of the gas production and transmission component. Teaching and research capabilities of local petroleum institutes will be strengthened and a number of exchange programs between local and foreign institutes will be established. To date, the Bank has supported 19 energy projects in China, two of these were natural gas projects. Policy and pre-investment studies for the project were supported by the Global Environment Facility's Preinvestment Facility, the United Nations Development Programme, the Japanese Grant Project Financing Facility and the Bank's International Development IBRD Association. According to Ms. Shum "The project 55t illion (27/o) is an excellent example of extensive cooperation and involvement by the donor community and the Global Environrnent Chinese authorities." Tist Fund W , $10 Millin (1%) SPA/CNPC The $255 million Bank loan is extended for s680.2 milion 20 years, including five years of grace, at the (72/o) Bank's standard variable interest rate, currently 7.27 percent. The $10 million from the Global Environment Trust Fund is a grant.' 'Note that money figures are expressed in US dollar equivalents. 2/.