Stepping On The Gas: China's Truckers Scramble To Meet LNG Demand



Reuters

CAOFEIDIAN, China, Nov 7 (Reuters) - Li Ruipeng's phone has been ringing off the hook with factories and hotels looking to get their hands on prompt supplies of gas.

"Orders started to shoot up from September. Some are asking for deliveries the very next day," said Li, a manager with privately run Huapu Gas, which delivers super-chilled gas by truck to customers within a 500-km (310 mile) radius of its base in Tangshan, east of Beijing.

Huapu is one of a fast-growing band of trucking companies that are transforming China's once-sleepy domestic spot market for gas into a unique and bustling business as Beijing pushes to wean the country off coal.

Hotels, hospitals and factories have been forced to swap their coal-fired boilers for gas ones this year, creating thousands of new standalone gas customers thirsty for the clean fuel.

But with inadequate pipelines and storage tanks, users in the world's second-largest liquefied natural gas (LNG) importer are scrambling for supplies of imported and locally produced gas from dealers like Li.

He's currently dispatching nearly 40 trailers a day, each carrying 20 metric tonnes of LNG. That's double the number six months ago, with customers lured by quick delivery and the chance to bypass higher government-set prices for pipeline gas.

"Inflexible pricing for pipeline gas, insufficient grid network and lack of storage facilities ... make trucked LNG a unique business in China," said Chen Zhu, managing director of consultancy SIA Energy.

Trailer Break

The trend is a major break from the global industry norm, where buyers and sellers are locked into long-term contracts - some as long as 20 years - and rely on pipeline grids to deliver the fuel.

China's first gas trailer hit the road in 2003 as trucks run by companies like Guanghui Energy travelled for over a week to ship gas from remote northwestern onshore fields to factories 5,000 kms (3,000 miles) to the south.

Now, Li and his peers are expected to play a critical role in keeping the world's most populous nation fueled this winter as it embarks on an experiment to heat homes in nearly 30 northern cities with gas.

The additional demand has boosted spot gas prices over the past month and industrial users have struggled to get their hands on supplies.

Gas hauled by trailers could make up a tenth of China's total gas consumption of around 240 billion cubic metres (bcm) in 2017, compared with 5.6 percent in 2014, said Chen.

And China aims to lift gas to supply 15 percent of its total energy demand by 2030, more than double the current 6 percent.


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