The Asian Infrastructure Investment Bank (AIIB) has approved its first loan in China, a US$250mn funding for a natural gas project.
Despite being led by China, also its biggest shareholder, the AIIB has spent its first full year funding projects outside of China, mainly along the Belt and Road Initiative (BRI) corridors.
It also represents the AIIB’s first corporate loan: the borrower is the Beijing Gas Group Company. That its first loan to China is for natural gas is symbolic of Beijing’s desire to move towards cleaner energy sources, at a time of year when the skies are thick with smog. It is estimated that pollution is responsible for one out of every five deaths in China, killing more than 4,000 people a day.
The project will connect 216,750 households in 510 villages to the natural gas distribution network. This, the AIIB says, will reduce carbon dioxide emissions by almost 600,000 tonnes.
AIIB president Jin Liqun says that “China’s commitment to reducing its reliance on coal will change lives and improve the environment, and that is why we are investing in a project aligned with their ambitious plan”.
While experts estimate that China reached peak coal consumption in 2016, it is still widely used for central heating and powering factories. In 2016 it made up 62% of the energy mix, down from 70% at the turn of the decade.
Ahead of what will be a bitterly cold winter in many parts of China, the country embarked on a huge LNG purchasing push this year, helping drive prices up by two-thirds since the start of 2017.
In a sign of China’s eagerness to broker new supplies, Sinopec, the state-owned oil company, signed on to a US$43bn natural gas project in Alaska during President Donald Trump’s tour of Asia.
Over the course of the next year, the details of the funding will be finalised, but the deal involves Sinopec, China Investment Corp and the Bank of China, along with the Alaska Gasline Development Corp, on the US side. The pipeline will carry gas from north Alaska to a liquefaction plant in the south, to produce 20 million tonnes of LNG. Sinopec will be among the offtakers.