As gas heating demand soars, China's Hebei warns of shortages

BEIJING (Reuters) — China's Hebei province has told cities across the region to force shops and factories to cut their natural gas use due to shortages, the strongest sign yet that Beijing's shift to clean fuel is hurting businesses across the industrial heartland.

Demand for gas in the world's second-largest economy has surged after the government ordered millions of households across northern China to convert to gas heating from coal this year and companies to replace their coal-fired industrial boilers with gas or electricity as part of its war on pollution.

The government has been battling toxic smog, produced from the emissions from coal-fired power plants, that blankets the north during the winter when people turn up their home heating.

Hebei's Development & Reform Commission (DRC) issued an orange alert, the second-highest level in its four-tier scale, and urged city authorities to force commercial and industrial users to cut gas consumption, according to the notice reviewed by Reuters.

"Due to gasification projects and overall efforts to remove coal, gas consumption rose rapidly in Hebei. Upstream producers also cut supplies leading to a bigger tightness," the notice said.

A Hebei official confirmed the document's authenticity, which was issued on Nov. 27 and came into force on Nov. 28.

It is not known how long the measures will be in force.

The Hebei DRC declined to comment on the situation.

An orange alert means Hebei, the country's largest steelmaking province, faces a gas supply shortfall of 10% to 20% of its current needs.

Hebei's warning comes just two weeks since the newly installed radiators were switched on for the winter on Nov. 15. The government has said residential users will have supply priority over industrial users.

It is the latest region to be hit by a supply shortfall after neighboring Shandong province cut supplies to some industrial and commercial users.

"It is the first time I remember that a province issued a province-wide notice," said Wang Haohao, a natural gas analyst at consultancy Longzhong Information Group.

She said the cut will hit factories from fertilizer plants and chemical plants to commercial users, such as restaurants.

The emergence of supply issues so early in the winter will underscore concerns that China's insufficient infrastructure and inadequate domestic supplies could lead to power shortages for heavy industry. Gas prices have surged due to the growing demand, adding to companies' costs of operating.

The problems also illustrate the heavy burden that is falling on China's small- and medium-sized manufacturers because of Beijing's radical move from coal.

Reporting by Meng Meng and Josephine Mason; Editing by Christian Schmollinger

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