Changes in LNG logistics are expected to resolve the gas shortage crisis”

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Source: China Chemical Industry News. At the 2018 China Hazardous Goods Logistics Development and Safety Management Summit Forum held recently, Wang Ye, vice president of the Liquefied Natural Gas branch of the China Industrial Gases Association, raised a thought-provoking question: What were the causes of the natural gas shortage last winter? Will such a shortage occur again this winter? In Wang Ye’s view, last year’s shortage was closely related to the storage and transportation of natural gas, and changes in these methods could potentially lead to shifts in the pattern of natural gas supply. 　　The shortage of resources is due to insufficient capacity. Wang Ye said, \"On the surface, last year’s gas shortage was caused by inadequate domestic production and imported gas (including through pipelines and LNG), but the real reason for this shortage was the inability to handle the logistics and storage of LNG properly.\" Of the more than a dozen LNG receiving stations that have been built in our country, less than 2/3 of their actual reception capacity is utilized each year. Why not increase the volume a bit more? During the off-season, there are no tanks available for storage, and during the peak season, there are no trucks to transport the gas. Attempting to add more LNG transport trucks is hindered by regulatory restrictions. Additionally, the inadequate infrastructure for natural gas distribution in our country, along with the lack of connectivity between different systems, prevents the necessary capacity for adjusting supply levels from being utilized. All these factors were the main reasons for the gas supply shortages last winter. ”　　Wang Ye believes that such a dilemma can be completely resolved by LNG tank containers. As a means for storing and transporting LNG, tank containers are not a new concept; their use abroad dates back to the 1990s. In China, Xinjiang Guanghui built dedicated railway lines as well as supporting facilities such as LNG tank containers during the construction of its LNG project in 2002, and in 2003 it helped establish the first standard for **Liquefied Natural Gas Tank Containers**. However, over the following decade or so, tank containers did not play a significant role in natural gas storage and transportation. 　　“Internationally, whether it is gas-importing or gas-exporting countries, natural gas is transported via pipelines on land; LNG, which is stored and transported in tanks, appears only in ports and at sea. However, the situation in our country is rather special: last year, as much as 24 billion cubic meters of LNG was transported on roads, accounting for over 10% of China’s total natural gas consumption. Why does this happen? It is related to the insufficient domestic pipeline network resources. ”Wang Ye explained, “The land area of the United States is roughly the same as that of China. The total length of its gas pipeline network is over 500,000 kilometers, while in China this figure is only 60,000 to 70,000 kilometers.” Only about 1/8 of that of the United States. According to international practices, when a country’s natural gas consumption reaches 130 billion cubic meters, the length of its pipelines should be 180,000 kilometers. Our current consumption is approaching 240 billion cubic meters, yet the length of our pipeline network is only a few ten thousand kilometers; there is a severe shortage in the number of pipelines. ”　　The use of containers can reduce trade costs. The rapid increase in demand for natural gas, coupled with a severe shortage of infrastructure such as pipelines and receiving stations, creates valuable opportunities for the transportation of LNG in tank containers. In fact, since last year, some companies have begun using tank containers to import LNG. 　　According to Chinese customs statistics, in 2017 China imported approximately 240 tons of LNG via containers, with unloading taking place mainly at hazardous materials ports in cities such as Shanghai, Tianjin, Qingdao, and Haikou. These supplies originated primarily from Belgium, Australia, and North America. The companies involved are Sinochem International (Holding) Co., Ltd., Zhenhua Logistics Group Co., Ltd., Tianjin Guochu New Energy Development Co., Ltd., and Shenzhen Guiyuanjin Trade Co., Ltd. Currently, Sinochem International Logistics is working in partnership with the China Classification Society on conducting national standard tests for LNG tank containers. 　　“Transporting LNG in tank containers is not only flexible but also not constrained by natural gas pipelines or LNG receiving stations. It is possible to use existing container ships for transportation, eliminating the need to build or rent specialized LNG carriers, as well as to construct dedicated LNG terminals and receiving stations. Unloading can be carried out at existing hazardous materials container terminals, which saves a significant amount of investment in infrastructure. Moreover, multimodal transport is feasible; through road, rail, and inland waterway transportation, LNG can be delivered from the point of origin in the exporting country to the end user in one go, reducing intermediate steps, enhancing safety, and providing a door-to-door solution that significantly lowers the trade costs of LNG. ”Wang Ye said. 　　Wang Ye believes that, as a high-quality, efficient, and clean low-carbon energy source, natural gas will account for an increasingly larger share in China’s primary energy consumption structure in the future, and imports of LNG will continue to rise. LNG tank container transportation features few transport steps, wide coverage, low investment costs, low market entry barriers, and convenience and flexibility, which will effectively alleviate the issue of insufficient natural gas transportation capacity in our country. 　　It holds the potential to transform the LNG logistics chain. “The advantages of using tank containers for transporting LNG lie not only in lower costs and greater flexibility; this type of logistics approach could also change the ecological environment of China’s LNG industry.” ”Wang Ye said. 　　In the past, imported liquefied natural gas was transported to docks by large ships, then to receiving tanks, and from there to tank trucks; these tank trucks would deliver the gas to smaller tanks. There were even secondary and tertiary processing stations. This process represents a waste of carrying capacity as well as a waste of repeated investment in equipment; it also causes some gas losses, making such a transportation method unreasonable for use in inland areas. By using tank containers, it is possible to break down the process into smaller steps; from the source of gas supply to the end-users, a seamless one-stop logistics service can be provided, **reducing intermediate steps and fundamentally changing the logistics ecosystem for LNG. 　　Furthermore, another very important change brought about by the use of tank containers is that LNG imports are no longer dependent on large receiving stations, large transport ships, and gas pipelines; this means that natural gas trade will become more open. Since these large-scale LNG storage and transportation facilities are capital- and technology-intensive projects with long construction periods and high entry barriers, they are currently built and operated mainly by the three major oil companies and well-established energy firms, creating a natural monopoly mechanism. 　　Wang Ye said that the introduction of tank containers has provided a way to break through monopolistic barriers, enabling small and medium-sized enterprises to participate on a large scale in LNG international trade. It also offers effective methods for identifying and tapping into additional sources of imports, connecting upstream and downstream supply chains, and establishing a diversified supply structure. Russia and the United States also view LNG tank containers as a promising mode of transportation, and are actively discussing tank container trade with Chinese companies. 　　However, Wang Ye also pointed out that the transportation of LNG tank containers still faces certain constraints at present. According to the current regulations in our country, LNG is classified as a hazardous chemical; it is not allowed to be transported by rail or inland waterways, and can only be transported by road. At present, in many provinces, it is very difficult to obtain the necessary permits for vehicles used to transport hazardous chemicals. Obviously, these regulatory measures regarding transportation impose constraints on this new mode of transport. He hopes that the relevant authorities will promptly introduce scientific, reasonable, and practical management measures in response to these new changes, so as to ensure smooth operations in the LNG logistics industry and prevent another gas shortage in the future.