China sees gas supply crunch amid surging demand in colder winter

04 January 2013 08:01  [Source: ICIS news]

SINGAPORE (ICIS)--China has been witnessing supply shortage of natural gas in most areas amid surging domestic demand from heating utilities caused by the colder-than-normal winter in late 2012, industry sources said on Friday.

Beijing, for example, has marked a new record of daily gas consumption at 62.57m cubic metres (cbm) on 24 December, an official from Beijing Development and Reform Commission said.

“Gas consumption for heating purpose has been surging as Beijing is going through the coldest winter recorded in the past decade. We are running gas pipelines beyond workloads,” the official said.

“However, we can still hear from [the] citizens about insufficient heating supplies from time to time,” the official added.

Wuhan city in central China’s Hubei province currently receives about 4m cbm/day of natural gas supply to its urban area, according to a company source from Wuhan Natural Gas.

However, gas demand has exceeded supply by 600,000 cbm/day as the local temperature falls below zero degrees Celsius, the source added.

Since households, public facilities and transportation are given priority access to natural gas, gas supplies to other users such as fertilizer plants, gas liquefaction plants and even liquefied natural gas (LNG) filling stations have been suspended or reduced, industry sources said.

PetroChina has increased its purchase of spot LNG cargoes to boost supply, procuring three to four spot cargoes for December and also some cargoes for January.

One major reason behind the severe gas shortage in winter season is the lack of storage facilities, according to industry sources.

The storage capacity of China’s underground gas tanks was just 2.1bn cbm as of 2011. However, based on the global average gas storage level at 8-12% of the total consumption, China should have at least 10bn cbm of gas storage capacity, given that its consumption was at 130.71bn cbm in 2011, said Yang Jianhong, senior engineer deputy director of Oil and Gas Pipeline Engineering Department of PetroChina Planning and Engineering Institute (CPPEI).

Many cities experience gas shortage when winter comes, which is defined by industry players as “structural gas crunch”, he explained.

Nanjing in east China’s Jiangsu province, for example, consumes twice as much natural gas in winter than it does in the summer season, a source from Towngas (Nanjing) said.

However, the city can just raise its piped gas supply by a maximum of 20% during the consumption peaks, which is far from enough to meet demand in the city, the source added.

Gas companies in some cities are not equipped with LNG storage tanks, which worsens the situation, the source added.

Cities such as Nanjing and Wuhan are building LNG storage stations for peak shaving.

However, peak shaving troubles still remain because the capacity of these stations is smaller than those of storage tanks and is mostly for short-term supply only, the source went on to add.

By: Ricki Wang
+65 6780 4359

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