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Asian Petroleum Review : Jan-March 2011
Feeling the pain of soaring fuel bills, trawler captain Liang Liming is thrilled to hear that in a few years his diesel-guzzling 400-horsepower boat may shift to natural gas, a cleaner fuel about a third cheaper. Independent firms supplying retail volumes of liquefied natural gas (LNG) around China are targeting hundreds of thousands of users such as Liang, gunning for as much as 10 percent of China's roughly 1.6 million barrels per day diesel market for transport use by 2015. LNG, gas chilled to liquid form for transport, will be used to fuel heavy-load trucks, city buses and river fleets as the world's top energy user and greenhouse gas emitter moves aggressively to boost gas use to combat emissions. Firms such as Xinao Gas and Xinjiang Ghuanghui are involved in the sector, which liq- uefies and transports small volumes of gas and which has flourished quietly outside of the focus of China's leading energy firms. The bigger companies have preferred to invest in giant LNG import terminals and a pipeline grid to pump larger volumes of gas to factories, power plants and residents. But the pace of growth in the trucked LNG sector has caught the attention of giants such as CNPC and CNOOC, and would probably spur an in- crease in spot LNG imports on top of long-term deals with exporters such as Qatar and Australia. "The weigh-in by majors means they now realise it's a market of huge potential, " said Ye Yong, deputy general manager of Shenghui Gas & Chemical Systems, a Jiangsu-based manufac- turer and engineering firm specialising in LNG trucks and storage. Industry estimates of the amount of LNG being trucked around vary between 2 and 6 million tonnes a year, versus China's total annual im- ports of around 10 million and total Chinese gas demand equivalent to 73 million tonnes this year. "Six million tonnes is doubtful, it's so big. But my bet is that trucked LNG will probably grow at 25 percent a year in the next five years, because its price is competitive and the government in clearly on the path towards low carbon and en- ergy saving," said a manager at private gas firm JOVO Energy Co Ltd. POLICY EVOLUTION Energy policy makers in Beijing started with a "no-go" for onshore liquefaction plants, seen as a distraction from China's massive pipeline drive, but the surging demand for gas, which tripled in the past decade, and recurrent winter shortages forced the government to review its stance. Despite the lack of policy support, scores of LNG plants have mushroomed since 2001, near mar- ginal gas reservoirs often overlooked by big oil firms and which are now churning out some 20 million cubic metres of gas a day, equivalent to 7 percent of China's total gas demand, industry officials estimated. Similar to the "teapots" - - China's small oil re- finers - - these liquefaction facilities have be- come a dynamic swing supplier to container trucks at major ports, factories and new resi- dential compounds, a cluster of consumers that has expanded faster than the pipelines can reach. Gas for transport is not new in China, which early this decade started using compressed piped natural gas under high pressure (CNG) for thousands of city buses and cabs, replacing diesel or liquefied petroleum gas - a refinery byproduct. But gas in liquid form is more efficient, with a driving range nearly triple that of CNG. At the height of a supply squeeze last winter, LNG tankers operated by private firm Xinjiang Guanghui, a pioneer in the sector, shipped gas travelling over a week from the remote north- west to fuel-thirsty factories in the southeastern province of Fujian 3,000 miles away. "It signals a number of things that are positive for the gas sector - - the strength of demand not yet fully supplied by on-grid supply and the overall willingness of buyers to pay higher prices," said Gavin Thompson of Wood Mackenzie. Next use for gas in China: Trucks and trawlers By Chen Aizhu BEIJING "It would perhaps take three years to solve the technical problems - - to revamp ship engines and truck engines" - Ye Shenghui's manager