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Clean fuel drive to continue LNG's stellar run

By ZHENG XIN | China Daily | Updated: 2021-03-24 09:50
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Sinopec employees conduct safety checks on LNG transport equipment in Tianjin in November. HU QINGMING/FOR CHINA DAILY

Aiming to increase the share of natural gas in the primary energy mix to 15 percent by 2030 from around 8 percent in 2019, China has already been reducing carbon emissions by replacing coal and oil with natural gas in certain areas including residential heating and heavy-duty commercial vehicles. This is also in accordance with the government's priority of improving air quality.

China mainly imported LNG from countries including Australia, Qatar and Malaysia, which sold 29 million tons, 8 million tons and 6 million tons of LNG to China last year, respectively, with sales value reaching $10.3 billion, $3.4 billion and $1.8 billion, data from the General Administration of Customs showed.

Beijing imported the most LNG last year, 35.13 million tons worth $12.5 billion, followed by Jiangsu province's 8.13 million tons at $3.1 billion and Guangdong province's 4.2 million tons at $1.2 billion.

Cao said that while increased natural gas usage at the expense of coal and oil will help reduce China's carbon emissions, the Chinese government is unlikely to rely on imported gas to achieve meaningful decarbonization or carbon neutrality, unlike the United States, which has abundant domestic gas supplies that have helped lower its emissions.

"Experience from European countries shows that biomethane and hydrogen are a crucial next-step to enable long-term climate goals to be reached. The emissions intensity of natural gas can also be lowered substantially with carbon capture use and storage technologies, or CCUS. A combination of these three approaches will help the natural gas industry evolve and deliver low-carbon growth," she added.

China's opening-up of LNG terminals to third parties will also encourage more participants to get involved in the LNG import sector.

China Oil & Gas Piping Network Corp (PipeChina), China's largest energy infrastructure company-created in 2020 amid the country's largest gas market reform in decades-launched a website platform in late October that allows all third parties to register as certified shippers and apply for pipeline transmission and LNG import capacity. Some 1,000 shippers had applied for certification on the platform by the Oct 20 deadline, it said.

With original intent to liberalize China's natural gas market and allow more market participants to access LNG infrastructure facilities, PipeChina allows other companies in addition to the countries' top three oil majors-China National Petroleum Corp, China Petroleum &Chemical Corp and China National Offshore Oil Corp-to be able to use its terminal slot and import LNG without having to build their own terminals, which in turn lowers barriers to entry in the Chinese gas market.

PipeChina last year began its role as the operator of six existing LNG terminals that were transferred from China National Offshore Oil Corp and China Petroleum& Chemical Corp.

In the last quarter of 2020, the number of new entities accessing the terminals as part of the third-party access initiative had led to increasing terminal imports at Diefu and Yuedong terminals in Guangdong province, said BloombergNEF.

Six new users at Diefu terminal, which included power and gas utilities and local gas trading companies, contributed to 36 percent of total terminal imports in the fourth quarter of last year, it said.

Many Chinese power and gas utilities entered the market last year, starting with spot LNG cargo purchases, signing term contracts to secure long-term supplies.

Guangdong Energy signed a five-year deal with Mitsubishi's Diamond Gas for four cargoes of gas a year, with Shenzhen Energy to receive a third of the gas. As a result, Dapeng LNG terminal registered a 17 percent year-on-year growth in imports, thanks to third-party access utilization for stakeholders such as Guangdong Energy and Guangzhou Gas.

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