The Natural Gas Situation in Taiwan Tien-Sung Chien Energy Commission Ministry of Economic Affairs October 5, 2001

CONTENTS A. Natural Gas Supply and Demand in 1980-2000 B. Outlook for Natural Gas C. Measures for Promotion of Natural Gas Utilization D. Conclusions

Natural Gas Supply and Demand in 1980-2000

Energy Supply Structure （ 1980 - 2000） % year

Natural Gas Supply （1980-2000） 103m3 Indigenous Imported Year

Natural Gas Imports （1990-2000） Million tons 4.43 4.00 3.93 3.22 2.61 2.46 2.26 1.70 1.70 1.51 0.71 Year

Natural Gas Consumption （1980-2000）

City Gas Utilities Profile Number of Utilities：25 Material: Natural gas / LNG Clients：2.15 million Gas Sales：1billion cubic meters in 2000 2.74 million cubic meters per day Gas Prices：NG1 : 11.18－13.46NT$ NG2 : 13.29－15.01NT$ Gas Pipeline Length：16,000KM High Pressure Pipeline：2,600KM Middle Pressure Pipeline：4,600KM Low Pressure Pipeline：8,800KM

Gas Prices Unit : NT$/M3

Outlook for Natural Gas

Outlook for Natural Gas  Over the next two decades, the demand for natural gas is expected to grow significantly.It will be increased from 4.8 million tons in 2000 to 13 million tons in 2010 and 16 million tons in 2020.  The contribution of natural gas to total primary energy supply will increase from 7% in 2000 to 14% in 2020.  Natural gas for power generation will remain the largest consuming sector and occupy 60 -70% of total natural gas consumption.  The share of gas-fired unit to total power generation will increase from 16% in 2000 to 25% in 2020.

Projected Gas - Fired Power Plants

Gas-Fired Power Plants in Taiwan Ever Power 960 Mw Tatan 4,000Mw 2002 Kuo Kung 600 Mw Jun., 2003 Tungsiao 1,060Mw Hsin Tao 600 Mw Sep., 2001 Hsinta 2,200Mw Star Energy 490 Mw Apr., 2004 Chiahui 670 Mw Sep., 2003 South 1,090Mw Taipower IPP Sun Ba 980 Mw Apr.,2004 Talin 1,050Mw

Measures for Promotion of Natural Gas Utilization

Measures for Promotion of Natural Gas Utilization  Promote the construction of northern LNG receiving terminal.  Expand gas infrastructure including terminal facilities, inland and sea -bed trunklines, storage tanks .  Increase the use of gas through gas- fired units using in middle load replace peak load  Encourage the construction of gas-fired units of IPP.  Reduce supply cost of natural gas by removing import tariff and excise tax gradually.  CPC returns its revenues from canceling special price for fertilizer industry to all customers.  CPC Implements quantify discount system of gas prices for industry and city gas customers.  City gas utilities have been allowed to sell gas to industrial users since 1999.

Natural Gas Infrastructure Yang Ming Shan Projected LNG Terminal Shin Jr Shin Hu Shin Lung Shin Taur Shin Tai The Great Taipai Shin Chu Shin Hai Shin Shin Chu Chien C.P.C. Tung Hsiao Yu Miao Shin Chung Shin Chang Shin Lin City Gas Utility Shin Yun Chu Ming LNG Terminal Facility 240KM Shin Chia Underground Gas Storage Shin Ying Shin Nan Projected LNG Terminal Trunk Pipeline Shin Hsiung Yung An LNG Terminal Ring Pipeline Shin Kao Shin Ping Submarine Pipeline Nan Jen Constructing New Pipeline Distribution Station

CPC’s Yung - An LNG Receiving Terminal

Power Generation Cost in 2000 Unit : NT$/KWH Source : Taiwan Power Company

Quantity Discount of Gas Prices Source : Chinese Petroleum Corporatiom

Conclusions

Conclusions  Natural gas keeps playing an important role in Taiwan’s energy supply and demand.  Private invested northern LNG receiving terminal will increase supply diversity and hence improve the security of gas supply in Taiwan.  New gas infrastructure should be completed to cope with existing supply bottlenecks and meet regional growing demand.  Enhance the introduction and development of new technologies of gas supply system and gas equipment.  Competitiveness of gas cost will affect the demand for natural gas.