By Willis Guan

        China has seen a rapid growth in its NGV population for the past decade. For the development, it has no doubt that the industry is not only driven by the dramatically potential market but promoted by the government’s policies and regulations.

        Background
        1. Oil Supply Safety
        It is forecast that China may consume 0.22 billion tons of gasoline and diesel for automobiles in 2020. This will surely bring issues of oil supply safety and the increasing air pollution by automotive tailpipe emissions.

        China has been pursuing strategies to deal with the future situation-----the promotion of clean and efficient alternative fuel vehicles is one of the key strategies.

        According to the results of the WTW study on different fuels in different propulsion systems by CATARC, natural gas performs both well in GHG emission and energy consumption from a lifetime perspective.

        2. Clean Vehicle Action
        A National Plan called Clean Vehicle Action was developed and carried out in 1999 to address the vehicle emission pollutions in China. Use of NGVs and LPGVs were selected as the main solutions to reducing the pollutants from traditional vehicles. To date, the Initiative has gone through two five-year phases. In the first five year period, the project focus was on the R&D and demonstration of clean vehicle technology, and in the second five years, the focus shifted to application in the cities.

        China authorized the Ministry of Science and Technology(MOST) to be the leading coordinator for Clean Vehicle Action, for which MOST designs the related projects and organizes the nation-wide bidding involving enterprises, research institutes, colleges, and local committees for clean vehicle promotion.
        At the state level, China has a Coordination and Leading Commission for Clean Vehicle Action, the members of which involve several central governmental departments such as National Development and Reform Committee, Ministry of Construction, Ministry of Finance, Ministry of Communication, State Environment Protection Agency, Ministry of Public Security, National Petroleum and Chemistry Industry Planning Bureau, and so on.

        At the local level, the sub committee for the Clean Vehicle Initiative has a similar organizational structure to the state level. To achieve a practical effect of NGV demonstration, the local government usually aligns an enterprise with substantial power to integrate natural gas supply, retrofitting vehicles and natural gas refueling station construction.

        Promotion of NGVs in China
        - Vehicle demonstration
        Until the end of2006, NGV population and refueling stations in the? demonstrative regions reached 194,860 and 490 respectively.NGVs are fast growing in western cities of China where boast relatively abundant resources of natural gas.

        For the past 8 years, CNG vehicles grow steadily while LPG vehicles encountered some obstacles due to increasing price, poor fuel quality, and inconvenient infrastructure.

        According to the tracking of prices of different fuels in demonstrative cities of Clean Vehicle Action, from April,2006toApril,2007,the price of CNG is 46.7% that of gasoline and 53.8% that of diesel, which gives natural gas a comparative advantage in cost.

        Apart from the CNG vehicles operated in the demonstrative cities, 632 LNG buses and 15 LNG taxis are being operated in Guiyang, Urumchi, Beijing and Changsha.

        As a result of the promotion of NGVs, natural gas consumption as alterntive automotive fuel accounted for 1.3%,2.2% and 3.3% of the total natural gas consumption in the year2002,2004and2006respectively.

        - Policies and regulations
        According to ?Consumption Policy on Natural Gas?issued by the National Development and Reform Commission, supply of natural gas for civil use and vehicles? should be guaranteed.

        To promote the application of natural gas vehicles, the demonstration cities carry out different incentives. For example, road maintenance fee is reduced to 70% for NGV users in Chongqing, a metropolis directly administrated by the central government. In some cities, grants are given to buses and taxis for NGV conversions, and the age limit to non-business vehicles when they are converted is cancelled.

        Local authorities may give favorable land using policies for building gas stations. To support the operation of gas refueling stations, some governments offer income tax deduction and administrative fee reduction for the station runner.

        With NGVs’ development for many years in China, related regulations to NGV operation change for the better. A concept of Life-time Administration for NGV is closer to reality, namely systematic regulations from the birth to scrapping of an NGV. Typical regulations cover the following sectors:

Retrofit

1. Qualification approval for NGV retrofit businesses
2. Regulations to the daily operation of retrofit businesses

Registration
Changing the fuel name of the vehicle registered for the convenience of classified vehicle administration
Operation

1. Training requirement for NGV drivers
2. Annual inspection by vehicle administration agency both for the vehicle and the natural gas devices onboard
3. Requirement of periodical inspection by NGV owners

Maintenance

1. Qualification approval of NGV maintenance businesses
2. Maintenance standards for maintenance businesses
3. Regular inspection and maintenance requirements for the users

Scrapping

1. There is no specific regulation for the scrapping of NGVs, which is under the guidance of Vehicle Mandatory Scrapping Regulations of China
2. The cylinder and the conversion kits must be scrapped as the NGV is scrapped.

Refueling station construction and operation

1. There are two phases to be undertaken before a refueling station can be constructed to operate, namely application and check/approval. Undertakers of survey, design, construction and monitoring for building a refueling station must be qualified according to certain industry standards.
2. The operators of the station must get the License of Dangerous Chemicals to be able to run the business. They need to formulate in-house regulations for safe operation, such as inspection, emergence plan, and worker training.
3. The governmental agency, usually the local technical and quality monitoring agency, conducts inspection for the gas refueling stations. The inspection is focused on the gas containers and pipelines.

Supply, price and quality of natural gas

1. The government coordinates with related businesses to guarantee the supply of natural gas for the civil and vehicle use.
2. A proper price gap between natural gas and petrol fuels is made to position natural gas favorably in the market.
3. Test devices are required to monitor and publicize the quality of natural gas in the refueling station in some cities, and also the government agency for technical and quality monitoring is responsible for random check of the quality of natural gas sold in the station.

Cylinders
In view of safety, China has made relatively complete and tight regulations and standards for the technology and quality of gas cylinders from market entry to scrapping. Advanced and efficient technology is being promoted to facilitate the management of gas cylinders, such as RFID (Radio Frequency Identification).

The above mentioned policies and regulations are being improved and some others are being made with the development of China’s NGV industry, such as market entry regulations to special devices for NGVs and refueling stations.

Outlooks on NGV development in China

- Demand and Supply

1. A growth rate of 15% in the 10th five-year plan, 2001-2005; the same growth rate is expected to take place during 2006 to 2010

1. According to the Energy Strategy of China, percentage of natural gas consumption in the primary energy mix should rise from 2.8% in 2005 to 5.5% in 2010
2. According to the Energy Strategy of China, percentage of natural gas supply in the primary energy mix should rise from 3.2% in 2005 to 5.0% in 2010
3. Until 2020, the domestic supply of natural gas will be 100 billion m3, while the demand will be 200 billion m3. So LNG imported from southease Asia or other regions and natural gas through foreign pipelines will be needed.

- Aims of NGV industrialization
- Improving the reliability, safety and performance of gas vehicle products
- Improving the infrastructure for the promotion of gas vehicles
- Gas vehicle population to be 800,000~1000,000 until 2010