[NGW Magazine] China Invests in Storage
China is turning to natural gas storage to keep up with rising gas demand and to modulate its gas production. Recent announcements by CNPC and Sinopec show that China is investing in gas storage facilities; but it is not clear whether the ambitious goals will be enough to meet peak demand by 2020 and so ensure lower prices and adequate supply.
Gas shortages during the last winter season highlighted China’s lack of infrastructure, when Cnooc had to hire 100 trucks to take LNG to the north from the import terminals. In June 2018, Cnooc announced the construction of six 220,000 m3 LNG storage tanks at its Tianjin LNG terminal, as part of the expansion of the terminal which processes 7.25mn mt/yr.
The winter shortages prompted the top planning authority National Reform Development Commission (NRDC) to announce in April 2018 a goal to expand natural gas storage – which accounts for only 3% of China’s demand – and bring it up to 16% by 2020, in line with the international standards of 12-15% of yearly demand.
The NRDC also has another goal: to increase China’s gas exploration and production. With shale gas and coal bed methane production rising along with technological advances, more gas may be produced. This fits with the government’s plan to move from coal to gas. Demand is forecast at 500bn m³ in 2030, compared with 237bn m³ last year.
Most of China’s 25 underground gas storage facilities are operated by CNPC but they yielded just 7.41bn m3 last winter. In March, CNPC said it planned to increase its total working gas storage capacity to 15bn m3 by 2025. It also announced plans to build eight gas storage facilities in southwest China's Sichuan province and Chongqing municipality, which will cost more than yuan 21bn ($3.3bn). The NRDC and the National Energy Administration will also encourage an ancillary services market for constructing and leasing storage facilities at market prices. The NDRC has dictated that China gas suppliers should aim to have gas storage capacity amounting to 10% of contracted gas sales at any point of time.
Despite the government’s gas storage goals, some industry insiders expect China’s northern regions to face similar gas shortages later this year. This could ease a little very soon as China's largest natural gas storage and logistics centre is expected to start operation in Henan province by the end of 2018, according to Sinopec. The facility will boost Sinopec’s capacity with working gas capacity of around 3.3bn m³ at a cost of yuan 13.87bn ($2.01 bn).
NGW