OREANDA-NEWS. July 10, 2012. China National Petroleum Corp. (CNPC) will invest RMB 8 billion (USD 1.26 billion) on a major expansion of Chongqing Municipality’s natural gas supply infrastructure, local media reported.

CNPC will deploy the capital for building 32 pipelines over the next three years that will extend Chongqing’s gas grid coverage to all 38 districts and counties, according to a report in the Chongqing Daily.

Chongqing’s gas market is poised for significant growth as more and more rural residents move to urban districts, according to Niu Xiaohui, an analyst with Beijing S&P Information Consult Co. Ltd. Chongqing in southwest China has the largest population of the country’s four municipalities, but also has the lowest urbanization rate, Niu told Interfax.

Some 55 percent of Chongqing’s 29.19 million residents lived in urban areas last year, according to statistics released by the municipal government on April 24. By comparison, Beijing’s urbanization rate was 86.2 percent in 2011.

“Chongqing's gas consumption is forecast to increase by 500 thousand cubic meters (Mcm) per year in the coming years due to increasing numbers of residential users and vehicular gas users. This does not include gas-to-chemical industries that the municipality hopes to promote,” Niu added.

News of CNPC’s investment is the latest fillip for Chongqing, whose Communist Party leader Bo Xilai was purged in March for what Beijing has termed “disciplinary violations.”

Last week, China’s largest state-owned investment firm agreed to commit RMB 30 billion (USD 4.71 billion) on shale gas and coal projects in Chongqing. State Development & Investment Corp. will deploy the capital for shale gas development and to build a coal port and a national strategic coal storage base.

CNPC’s investment can be traced back to a cooperation agreement signed in April between the company’s gas distribution arm, Kunlun Energy Co. Ltd., and the Chongqing government to encourage efficient utilization of liquefied natural gas (LNG). Part of the agreement stipulated that the parties would jointly work to facilitate the introduction of 10,000 LNG-powered vehicles by the end of 2015 and 50,000 by the end of 2020.

In addition to the pipeline construction, CNPC will build 55 LNG refilling stations, seven multi-purpose gas utilization stations in wharfs and ports, and similar facilities in five industrial parks by 2020, the report said.

The stations will include storage, power generation and refueling operations. Altogether, they will be capable of storing 520 Mcm of LNG, enough to serve 50,000 vehicles and 100 vessels. Chongqing recently deployed a fleet of 100 LNG-powered buses provided by CNPC, the report added.

CNPC will supply Chongqing with 11 billion cubic meters per year of gas by the end of 2015, Interfax previously reported.