China's LNG Trucking Capacity to Double: WoodMac
China’s LNG trucking capacity is expected to double to 38mn mt/yr by 2025, said consultancy Wood Mackenzie June 4.
Being the world’s largest LNG trucking market, China last year transported 19mn mt of LNG via tanker truck from domestic liquefaction plants and LNG import terminals to downstream markets. This volume accounts for 12% of total gas consumption, WoodMac said.
LNG trucking played a key role in supporting gas demand last winter season when government mandated coal-to-gas switching. New residential, commercial and industrial gas users outside pipeline coverage resorted to trucked LNG as the only way to fulfil switching targets as there was not enough time nor is it economical to build or expand pipelines, WoodMac said. Also, domestic liquefaction plants were unable to cope with the surge in winter demand due to rationing of feedgas. Trucking enabled terminals to import more LNG than regas capacity, and excess LNG can be transported off to demand areas across the country. In some cases, LNG was trucked more than 2,000 km from southern terminals to northern China, WoodMac said, adding that the flexibility of LNG trucking alleviates China's lack of pipeline coverage, storage and regas capacity. It also adds liquidity to China's gas market and facilitates price discovery.
"While we witnessed logistics companies rush to buy more LNG trucks over last winter, equally important is the number of truck-loading positions and operational efficiency at LNG terminals. These factors determine the amount of LNG that can be transported out to demand centres," said Miaoru Huang, senior manager, WoodMac.
"The good news is truck-loading positions can be added relatively quickly, and currently, there are about 20.2mn mt/yr of truck-loading capacity across the country's LNG receiving terminals. We expect China's gas demand to reach 264bn m3 this year. Similar to 2017, 12% of demand will be supported by LNG trucking," added Huang.
Historically, the main LNG trucking movements were from LNG plants in northern China to demand centres in coastal regions. However, as the cost of imported LNG has declined, domestic LNG plants face steeper competition from imported LNG, according to WoodMac.
Wood Mackenzie estimates that the cost of delivering LNG to coastal regions (south and east China) in 2017 via import terminals was about $2-4/mn Btu cheaper than from domestic LNG plants located in the north. However, the converse is true in the case of delivering LNG from southern terminals to the north. It would therefore be more economical to source LNG from the same region, WoodMac said. Despite this, LNG was trucked from the south of the country to the north during the last peak winter demand. The high delivered cost of LNG was supported by the surge in LNG prices.
"LNG buyers are likely to have learned from the experience and will try to avoid being caught by price surges again. As such, trucked LNG price as high as US$30/mmbtu seen during last winter is unlikely to occur again," said Huang. "LNG trucking has increased gas-on-gas competition. It has helped create a spot market for gas. Until China's gas market evolves to one with a price discovery function, trucked LNG will continue to be welcomed by market participants looking for liquidity and flexibility.”