PLC Paper No. CB(1) 44/97-98
(These minutes have been seen by the
Administration and cleared with the Chairman)
Ref: CB1/PL/ES/1

LegCo Panel on Economic Services

Minutes of the Meeting
held on Monday, 16 June 1997,
at 2:30pm in Conference Room A
of the Legislative Council Building

Members present :

    Hon Henry TANG Ying-yen, JP (Chairman)
    Dr Hon LAW Cheung-kwok (Deputy Chairman)
    Hon Mrs Selina CHOW, OBE, JP
    Hon Mrs Miriam LAU Kin-yee, OBE, JP
    Hon LEE Wing-tat
    Hon Fred LI Wah-ming
    Hon Howard YOUNG, JP
    Hon CHAN Kam-lam
    Dr Hon Anthony CHEUNG Bing-leung
    Hon LAU Chin-shek, JP
    Hon SIN Chung-kai

Members absent :

    Dr Hon David K P LI, OBE, LLD (Cantab), JP
    Dr Hon HUANG Chen-ya, MBE
    Dr Hon Philip WONG Yu-hong
    Hon Mrs Elizabeth WONG, CBE, ISO, JP

Public officers attending :

Mr Leo KWAN Wing-wah, JP
Deputy Secretary for Economic Services

For agenda item III

Mr Arthur AU
Assistant Secretary for Economic Services
Mrs Lessie WEI, JP
Director of Agriculture & Fisheries
Mr CHEUNG Man-kwong
Assistant Director (Fisheries)
Dr LEUNG Siu-fai
Senior Fisheries Officer (Acting)
Agriculture and Fisheries Department

For agenda item IV

Mr LI Kwok-tso
Principal Assistant Secretary for Economic Services
Miss Bonnie YAU
Assistant Secretary for Economic Services
Mr H B Phillipson, JP
Director of Electrical and Mechanical Services
Assistant Director, Gas and General Legislation
Electrical and Mechanical Services Department

Attendance by invitation :

For agenda item IV

Det Norske Veritas

Mr Mark Boult

Coopers and Lybrand Consultants Limited

Mr Eric Conrad

Clerk in attendance :

Ms Estella CHAN
Chief Assistant Secretary (1)4

Staff in attendance :

Mr Daniel HUI
Senior Assistant Secretary (1)7

I. Confirmation of minutes

(LegCo Paper No. CB(1)1832/96-97)

The minutes of the meeting held on 12 May 1997 were confirmed.

II. Information papers issued since last meeting

(LegCo Papers No. CB(1)1576/96-97, 1597/96-97, 1634/96-97, 1714/96-97, 1751/96-97, 1838/96-97 and 1852/96-97)

2. Members noted the seven information papers issued since last meeting.

III. Development of fishing industry

(LegCo Paper No. CB(1)1847/96-97(01) and (02))

3. The Assistant Director (Fisheries) (AD/F) briefed members on the Administration’s policy on the development of the fishing industry as set out in the information paper.

4. Noting that the amount of outstanding loan provided by the Administration to fishermen was $17 million, Dr LAW Cheung-kwok opined that the loans for development purposes appeared inadequate. He enquired about the criteria for approval of loan applications and whether fishermen were able to secure business financing from commercial banks. AD/F responded that there were several loan funds made available by the Administration and their total loan fund capital was well above the $17 million outstanding loan. Moreover the Agricultrue and Fisheries Department (AFD) could apply to the Finance Committee for additional funds if necessary. These loans were provided to fishermen at below-market interest rates. The applicant had to be a fisherman and his intended use and repayment ability were important considerations for approval of loan. Although applications from individuals were acceptable, most applicants were members of fishermen co-operative societies. Business financing from commerical institutions were also available for the fishing industry.

5. Members enquired about the assistance provided to fishermen for inshore fishing. The Senior Fisheries Officer (SFO) responded that the Consultancy Study on Fisheries Resources and Fishing Operations in Hong Kong Waters to be completed in July 1997 would provide comprehensive data for planning, conservation, development and sustainable use of inshore fisheries resources. Meanwhile, AFD had launched the artificial reefs project costing some $100 million to help to sustain fisheries resources in the territory. AFD was also considering proposals to amend legislation for prohibition or restriction of destructive fishing practices. Three marine parks and one marine reserve providing safe havens for many forms of marine life had also been established. AD/F supplemented that there were also loan fund schemes and vocational training courses for fishermen to provide the necessary support for inshore fishing.

6. As to the reasons for the declining amount of fisheries production since 1989, the Director of Agriculture and Fisheries (DAF) advised that the catch from local fishermen amounted to about 70% of Hong Kong seafood consumption. There were various reasons for the decline in fish catch including reduction of fisheries resources, decrease in the number of fishermen and increased sale of fish catch to neighbouring countries. The Administration had several schemes such as deployment of articifical reefs to help sustain fisheries resources and scholarship awards with a view to attracting more young people to join the fishing industry.

7. Members pointed out that the shortage of deckhands was a major problem for the fishing industry and enquired about measures to address the problem. DAF replied that the People’s Republic of China (PRC) Deckhands Scheme had been introduced since 1995 which enabled a maximum of 3,500 PRC deckhands to work on Hong Kong fishing vessels and to enter Hong Kong specifically to unload catch at fish markets. Moreover, there were some other 3,000 PRC deckhands working on Hong Kong fishing vessels without entering Hong Kong Waters. These arrangements should address the problem. The contracts for the PRC deckhands were not covered by Hong Kong’s labour law as these were entered into outside Hong Kong and the work was performed mainly outside Hong Kong. At members’ request, AD/F agreed to provide information on the terms of contracts for PRC deckhands if available. (Post-meeting note : The relevant information provided by the Administration has been circulated to members vide LegCo Paper No. CB(1)1923/96-97 dated 24 June 1997.)

8. In response to members’ enquiry, DAF advised that the development of offshore fishing required large capital investments and its operation involved international fishing rights. AFD had held initial discussions with representatives of the fishing industry on the issue and would consult Advisory Committee on Agriculture & Fisheries before considering whether to commission a consultancy study on offshore fishing.

9. As there might be insurmountable barriers for development of Hong Kong’s fishing industry, members suggested that the Administration should consider development of fishing related services such as purchasing of fish catch from fishermen of neighbouring countries in public waters and shipping back to Hong Kong for sale. DAF responded that some local fishermen were already engaging in such business activities.

10. AD/F advised that the Administration also supported marine fish culture in Hong Kong but fish rafts had to be located in designated fish culture zones. DAF supplemented that at present there were 209 hectares of water areas in 26 fish culture zones. About 1,500 licences were issued for marine fish culture.

11. As regards the construction of a sheltered boat anchorage in Tai O, AD/F advised that AFD supported the need for the project and was working with other Government Departments on the design. The project was delayed since 1992 pending agreement on the Boundary of Administration between Hong Kong and Guangdong.

IV. Study of the feasibility of introducing a common carrier system for gas supply in Hong Kong (the feasibility study)

(LegCo Paper No. CB(1)1878/96-97)

12. Mr Mark Boult and Mr Eric Conrad briefed members on the summary of findings of the feasibility study as set out in the consultancy report.

13. The Deputy Secretary for Economic Services (DSES) advised that the report on the feasibility study was being released as a public consultation paper in order to gather comments from the community. The Administration would decide on the way forward after reviewing comments from the public before 15 September 1997. The Administration had not taken a position on any of the consultants’ conclusions and recommendations.

Control of Hong Kong and China Gas Company Limited (HKCG) during the transition to a competitive gas market

14. Members noted that a lead time of five to ten years would be required for any likelihood of introducing natural gas (NG) as a competitor to towngas in Hong Kong, and enquired whether the consultants had recommended a scheme of control for HKCG during the transition period. DSES responded that the consultancy study had not examined issues related to a scheme of control for HKCG because the terms of reference of the study was on the feasibility of introducing a common carrier system for gas supply in Hong Kong. The 10-year lead time was the most conservative estimate and it was possible that NG could be introduced to Hong Kong in less than 10 years. Mr Conrad supplemented that if a NG source was available to Hong Kong the next day, NG supply in Hong Kong could be achieved in three years under a fast track project. The long lead time estimated was to provide for possible difficulties of finding a suitable NG source near Hong Kong.

15. Regarding the Administration’s intention of establishing a scheme of control for HKCG, DSES advised that the Administration had signed an agreement with HKCG in April 1997 with regard to the consultation mechanism of price review of HKCG. Under the agreement, HKCG would provide data to the Administration to justify any price adjustment, making future price adjustments of HKCG more transparent. The Administration would allow the recently signed consultation agreement to operate for a while before reviewing its effectiveness.

16. Members noted the estimation in the consultancy report that Hong Kong’s gas market would grow at 4.4% per annum over the next 20 years and enquired about HKCG’s share of this estimated growth. Mr Boult replied that HKCG was expected to take up all of the growth because liquefied petroleum gas (LPG)’s market share was expected to decline over the years.

17. Members expressed concern that before NG would be made available to Hong Kong, LPG was the only competitor to towngas in the market. They enquired whether there would be measures to enhance LPG’s competitiveness. DSES advised that the major barrier was that pipes for supply of LPG were restricted to buildings within the same street block for safety reasons i.e. LPG pipes were not allowed to cross roads, thus restricting the size of networks for LPG supply. The Administration had recently prepared safety guidelines on construction of LPG pipes across roads with a view to removing the barrier. The Assistant Director, Gas and General Legislation, supplemented that the guidelines had been issued to LPG companies and become effective.

18. Members asked whether the Administration would take measures to prevent HKCG from establishing barriers against entry into Hong Kong’s gas market, for example, by providing huge discounts to major consumers thus making it non-profitable for new entrants to the market. DSES responded that the Administration’s monitoring on HKCG had been reinforced by the recent consultation agreement between the Administration and HKCG. The Administration would closely monitor any price adjustment of HKCG and take appropriate action if necessary.

Introducing competition to the gas market in Hong Kong

19. Members noted that the consultancy report seemed to cast a pessimistic view on the availability of a NG source for Hong Kong because of Hong Kong’s small market size and the absence of major industrial users, etc. They enquired whether it would be going the wrong direction to open up Hong Kong’s gas market by pursuing the NG option. Mr Conrad clarified that parties with vested interests in the gas market had expressed difficulties in finding a NG source for Hong Kong. Despite these difficulties, NG supply for Hong Kong was still possible on the basis of a regional concept e.g. a NG source could provide supply to different parts of South China, including Hong Kong. DSES supplemented that the possibility of another Hong Kong electricity station using NG for electricity generation could not be ruled out, thus increasing Hong Kong’s demand for NG.

20. Members opined that benefits to consumers should be the most important factor for evaluating options in opening up Hong Kong’s gas market. There was no point to introduce NG supply or another towngas company to Hong Kong if such measures could not bring benefits to consumers. DSES agreed and remarked that the Administration would only introduce competition to Hong Kong’s gas market if such measures would enhance consumer benefits. The Administration would examine the public’s views on the consultancy report before deciding on the way forward.

21. As to whether a second piping system would be required for supply of NG to households, Mr Boult replied that the report did not propose a second network for supply of NG as the existing towngas network could also be used to supply NG. Nonetheless, the network would need to be divided into sections to facilitate supply of different gases to different areas. Clients would have to change their appliances if they switched from towngas to NG.

22. Members observed that the first step in preparing for a common carrier system for gas supply was separation of HKCG’s towngas production facilities and the delivery network, to be eventually controlled by separate companies, so that HKCG’s network could be offered for third party access. They enquired whether the Administration would give priority to implementing this proposal in the report. DSES replied that he would consider members’ comments in this respect.

23. Members enquired whether the use of NG would be less costly to consumers and more profitable to HKCG. Mr Conrad advised that although NG was significantly cheaper than LPG, it required a compelling reason before HKCG would consider switching to supply of NG instead of towngas.

24. Noting that there would be an excess in NG supply to China Light and Power Company Limited (CLP) for its power stations, members enquired whether the excess could be made available to Hong Kong’s gas consumers through another company. DSES responded that the Administration did not wish to direct CLP to sell the excess supply to any company as this was a commercial decision. The Administration was monitoring the development to ensure that resale of NG by CLP would not be at the expense of its consumers’ benefits.

25. On the consultancy report’s indication that if introduction of NG was not possible, competition from another towngas company could be an alternative, members asked whether there would be sufficient demand for a second towngas company in year 2011 when the projected population would be 8.1 million, and whether HKCG’s future expansion plans would be frozen to make way for another gas company in future. DSES replied that the Administration had yet to take a position on the consultants’ recommendation. Moreover, he was not aware that HKCG had any major expansion plan on hand. Mr Boult supplemented that HKCG’s estimated production capacity would be able to cope with demand until year 2008. Additional towngas production facilities or an alternative source of gas supply would be required thereafter.

26. The meeting ended at 5:03 pm.

Provisional Legislative Council Secretariat
15 July 1997

Last Updated on 14 August 1998