China Issued Implementation Plan for Natural Gas Storage System

SCI99

2020-04-15

China Issued Implementation Plan for Natural Gas Storage System

On April 14, 2020, NDRC, MOF, MNR, MOHURD and NEA jointly issued the Implementation Opinion of Natural Gas Storage Capacity Promotion (hereinafter referred to as “Opinion”), and explicitly regulated the responsibility and obligation of administrations at all levels and set more rational and achievable goals for capacity construction, aiming to boost China’s natural gas storage capacity in a short term.

NDRC issued the Opinion of Natural Gas Peak-Shaving and Storage Facility Construction in April 2018 and set three goals for the storage capacity expansion: Upstream suppliers to build up storage capacity at 10% of annual sale scale, city gas companies to build up peak-shaving capacity at 5% of annual sale scale, and local administrations to build up 3-day emergency storage. After two years’ evaluation and amendment, the Opinion contained more specific goals, timelines and deliverable measures. For the goals, the Opinion requested to build up capacity according to local circumstances regarding valley-to-peak differences in echelons of 10:1, 8:1, 6:1, 4:1 and below. For instance, Northern China usually had valley-to-peak difference up to 8:1 in the winter heating season, and for big cities, the differences were even higher than 10:1. Thus, the storage capacity expansion shall be focused on those high-difference regions to build underground storage facilities, LNG receiving terminals and local LNG storage facilities, and interconnect via pipelines, tank trucks and LNG ISO containers to forge a complex and flexible peak-shaving capacity.

The Opinion also underlined the independent operation, investment return and pricing mechanism of storage facilities, and allowed independent storage facilities to earn profit from valley-to-peak speculation, which was a very sensitive topic in the past. The Opinion urged to accelerate the interconnection and open-up of natural gas infrastructure, and the systematic match-up of trading platforms of stored natural gas such as SHPGX and CQPGX. As for regulations, the Opinion requested the government to give more eased policy in approval, financial and investment support to shore up the capacity expansion, and schedule concrete implementation timeline and route map for each level within the first half of 2020.

China’s natural gas storage system was comprised by three parts, namely natural gas underground facilities, LNG receiving terminals and local LNG peak-shaving stations. By the end of 2019, SCI estimated China’s underground facilities could contribute 12 bcm working capacity, terminals contribute 4 bcm and peak-shaving stations only contribute 0.45 bcm, and China’s total working storage reached 16.45 bcm, accounting for only 5% of China’s annual natural gas consumption. China’s NOCs, in particular, CNPC and Sinopec, had worked hard together with the government on new underground facility and LNG terminal planning, and the private sector also showed interested in those facilities. However, without enough motivation, investment and supervision, China’s local LNG peak-shaving stations remained at a very early stage and developed slow. With the new Opinion pushing forward, it is expected that more and more city gas companies will bring their peak-shaving LNG tanks from the blueprint to reality or even united together to build large-scale regional hubs, and China’s natural gas bucket will find the final compensation for the shortest stave in its storage system.

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