Editorial Comment: China eyes continued expansion of smaller-scale LNG

Smaller-scale liquefaction in China, the world’s second-largest LNG importer, has experienced growth in recent years as China’s government integrates more gas into the country’s energy matrix. With more than 75% of installed global capacity for smaller-scale LNG production and a market capacity anticipated to reach 20 MMtpy this year, China is expected to remain the global hotspot for smaller-scale LNG through at least the late 2020s.

Unlike conventional LNG plants, which require large economies of scale to make up for significant CAPEX, smaller-scale LNG units require less investment, equipment and energy consumption. The modularization of hardware also allows fast and efficient manufacturing, installation and operation.

Smaller-scale LNG import infrastructure is helping China diversify its energy supply sources and enhance its energy security. China has the world’s largest number of LNG trucks, and it is implementing an LNG refueling infrastructure project to build approximately 3,000 CNG/LNG refueling stations by 2025. China also plans to expand its LNG bunkering pontoon fleet to more than 40 vessels.

China’s smaller-scale LNG exports. Over the past 20 yr, China has sent small volumes of gas via LNG containers to countries not well served by pipeline networks. The country is further exploring the use of ISO containers to export surplus gas from China. Each ISO tank holds approximately 17 metric t of LNG.

In January, China began exporting small LNG volumes to Cambodia. The imports will help Cambodia meet short-term gas demand for its smaller energy consumers, which represent almost half of the country’s total energy demand, until it can buy or rent an FSRU toward the middle of the decade. Cambodia aims to import 100,000 metric t of LNG in more than 5,800 ISO tanks in 2020, which is equivalent to just 1–2 regular-size LNG cargoes.

Growing interest in ISO imports. As an LNG importer, China has received smaller LNG volumes from the international market for peakshaving and other uses. The country is also exploring LNG break-bulk imports in neighboring countries like Japan and South Korea. The break-bulk process involves separating standard-size LNG cargoes into ISO tank containers for delivery to China’s coastal and riverbank ports. Potential supply partners include South Korea’s Kogas and Japan’s Shizuoka Gas.

In the past few years, Chinese importers have also conducted trial runs with LNG exporters in Australia, the U.S. and Canada, opening possible trade routes for smaller-scale LNG. For example, China Energy Reserve and Chemicals Group received around 100,000 metric t of LNG in ISO tank containers from the U.S., Canada and Australia between May 2017 and May 2018.

Also, Canadian natural gas utility FortisBC has an agreement with China’s Top Speed Energy Corp. to send 53,000 metric tpy of LNG, or around 60 ISO containers per week, from its Tilbury LNG smaller-scale terminal to China by mid-2021. Although these long-distance deliveries are operationally feasible, their longer-term economic viability must be further explored. GP