China’s Beijing Gas Group mulls short-term LNG storage

State utility Beijing Gas Group is considering chatering a floating storage unit (FSU) for the duration the coming winter to prevent the scheduling difficulties its LNG deliveries faced last year, market sources in China told ICIS.

The utility is planning to procure spot LNG again this year and wants to moor the FSU near state-owned PetroChina’s Caofeidian terminal in case it has to divert a vessel again, market sources said.

Beijing Gas Group bought two spot cargoes in 2015. One was delivered to Caofeidian in November and the other in late December. The second delivery had to be rescheduled when PetroChina encountered technical and operational issues at its Caofeidian LNG terminal and pipeline gas network, market sources said.

“The second cargo was diverted and discharged into PetroChina’s Dalian terminal on 1 January, but the company had to swap the LNG for pipeline gas at Caofeidian so it could send the supply to Beijing,” a source said.

“It was a logistical and operational nightmare for everyone involved,” a second source said.

Separately, Yalan Li, chairperson of the utility’s board of directors, confirmed that expectations of high gas consumption during winter were largely why Beijing Gas Group decided to buy two spot LNG cargoes last year.

In 2015, Beijing alone consumed 14.6 billion cubic metres (bcm) of natural gas, Li said, adding that this figure is forecast to rise in line with the growth in population and infrastructure. Gas is used mainly for power generation and heating usage in Beijing.

Over the long term, buyers will still require LNG imports to supplement their domestic supply as well as provide flexibility in meeting peak seasonal demand, Li said at the China LNG & Gas International Summit on 17 March.

However, having to buy spot LNG at prices set by the global market is challenging for new Chinese buyers trying to meet their end-users’ demand while keeping costs low, Li said.

“China is one of the largest gas consumers in the Asia-Pacific region…It is not feasible for China to be a price-taker for the long term,” said Li. xieli.lee@icis.com