August 13, 2018 [S&P Global Platts] - State-owned China Petroleum and Chemical Corp, or Sinopec, is building natural gas storage facilities with a total capacity of 55.6 billion cu m in the northern Henan province, to ease supply bottlenecks in peak winter season, the company said on its website Monday.
China is set to become the world’s largest gas importer within two to three years, but the lack of pipeline and gas storage capacity has impeded the growth of LNG demand, forcing end-users to rely on expensive last minute logistical solutions like LNG trucking.
Additional gas storage in northern China will also help alleviate supply issues to central and eastern China, and cushion surges in the price of LNG that touched a high of $11.70/MMBtu last winter.
Sinopec Group did not give a timeline or investment amount for building the 55.6 Bcm of new storage capacity, but it joins China’s largest petroleum company PetroChina, which recently announced construction of nearly 20 Bcm of underground gas storage in northeast China.
Sinopec’s gas storage cluster in Henan will comprise sixteen facilities built at the site of abandoned oil and gas fields in the province, such as the Zhongyuan Oilfield, the company said.
“The Zhongyuan Oilfield has entered its final stage after more than 40 years of exploration and development; but some underground reservoirs have formed an enclosed space that is suitable for gas storage,” Li Cungui, director of oil and gas development management department at Zhongyuan Oilfield Branch, said.
Sinopec’s first gas storage facility in the region – named Wen 96 with a capacity of 588 Mcm — has been in operation since 2012. The company is now building the Wen 23 storage facility nearby with a capacity of 1.04 Bcm.
“Construction work at the Wen 23 has completed 69.1%,” Sinopec said, adding that it plans to build five more storage units in the region before 2020 in addition to Wen 23.
China has accelerated the construction of underground gas storage facilities due to the challenges faced in transporting gas last winter, when logistical issues forced buyers to truck LNG thousands of kilometres from import terminals to consumption areas.
Chinese gas demand is forecast to grow by 60% between 2017-2023, underpinned by policies to curb air pollution and fuel switching from coal to gas, according to the International Energy Agency. “China alone accounts for 37% of the growth in global demand in the next five years and becomes the largest natural gas importer by 2019, overtaking Japan,” the IEA said in June.
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