"Pricing will be the major concern because how will you get bus and taxi
companies to use LNG or other gas instead of oil if gas costs more than oil? The
government would have to offer some sort of subsidy," said Matthew Kong, a car
analyst with Fitch Ratings.
Engines designed for CNG or LNG use are the same, said Brenda Smith, managing
director of consultancy group Gas Advisers and a board member of the
Asia-Pacific Natural Gas Vehicles Association. However, gas-burning vehicles
remain expensive because they are built in small numbers.
"The buses are significantly more expensive at the moment, with prices about
35 per cent or more above that of a normal bus. That's not because the
components are much more costly, but because they're not being built in large
numbers. If mass-produced, they'd only be five to 10 per cent more, and that
would be because the fuel storage system is a bit more expensive," Ms Smith
said.
She said using LNG for urban vehicles would make the programme unique. Other
countries experimenting with LNG have focused on longer-haul vehicles. But some
Chinese cities are unable to tap into piped gas, making LNG a suitable option.
Several Chinese cities including Beijing, Guiyang, Changsha and Urumqi are
already running small experiments using LNG in buses. Changsha is also one of
the first cities in the world to experiment with LNG-fuelled taxis.
The Sichuan Air Separation Plant has built a factory with capacity to build
as many as 5,000 LNG tanks per year. The tanks, made in varying sizes, are
designed as fuel tanks for cars and buses. CMIC Zhangjiagang Shengdayin
Cryogenic Equipment in Jiangsu province has also built a factory to make LNG
containers for vehicles.
The government is trying several strategies to battle transportation's
contribution to air pollution and create a cleaner image before the Beijing
Olympics in 2008. In March, it introduced higher taxes on big cars and cut taxes
for smaller models. The new rules aim to convince Chinese drivers to swap their
petrol-guzzling sport-utility vehicles and luxury sedans for smaller, more
efficient cars.
China opened its first LNG importing terminal in Guangdong province in June,
and numerous other LNG import terminals are planned for China's eastern
coastline. There are also small LNG plants in Xinjiang and Guangxi. But the fuel
is finding it difficult to compete with cheaper piped gas and China's huge coal
reserves, which produce 70 per cent of the energy used in the country
"In our opinion, CNG will be more important than other alternative fuels, so
we are investing more in CNG than in other fuels," Mr Hou
said.
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