China’s LNG demand growth, boosted by the government’s policy to switch from coal to gas to curb air pollution, has brought a new set of challenges for the country with limited pipeline coverage and lack of storage facilities. 

China’s gas demand has risen by more than 17 percent over the last year, with industrial coal-to-gas switching accounting for 40 percent of this growth. A further 30 percent of this came from new connections in the residential and commercial sectors, natural resources consultancy WoodMackenzie notes.

As a result, the country’s LNG imports jumped by 12.1 million tons in 2017, totaling 38.3 million tons.

But delivering the chilled fuel to the northern and eastern regions that saw peak utilization reach 119 percent and 159 percent, respectively, during the 2017/2018 winter, hampered the supply-demand balance.

WoodMac added that trucking LNG to the regions provided coverage, however, due to its complexity and the distance across which the LNG had to be delivered, saw the prices spiking to $30/mmBtu.

By the end of 2017, China had 17 LNG receiving terminals in operation, mostly in the south. LNG trucking provided the link to the northern and eastern regions, delivering 12 percent of China’s total gas demand.

With trucks ferrying imported LNG as well as domestic liquefied natural gas, the amount of the chilled gas delivered this way grew three times compared to 2012, WoodMac says.

However, despite the expenses, trucking LNG to markets with limited pipeline access is still seen as a solution, although it is expected that measures have been taken by market participants in order to cope with new winter gas shortages.