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Irina Slav

Irina Slav

Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.

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China’s Gas Storage Capacity Can’t Keep Up With Demand Growth

LNG

China’s natural gas storage capacity currently equals just 3.3 percent of the country’s demand for the commodity. This needs to change—and fast—if China is to succeed in its shift away from coal and oil to gas and avoid a repeat of the gas crunch that left several million homes without heating and electricity this winter.

There are plans in place to boost gas storage capacity to 4.8 percent of demand over the next three years, but this would still be below the global average, which is 11.7 percent of demand. Even the longer-term target of storage equaling 5.8 percent of China’s gas demand is significantly below the international average.

In absolute terms, storage capacity currently stands at 7.8 billion cu m, Bloomberg has calculated. This should rise to 14.8 billion cu m by 2020 and over 35 billion cu m by 2030. The problem, however, is that this might still not be enough to respond to growing demand.

If gas demand in the country was more or less constant, storage would not be such a headache. But there are significant swings in demand from its winter peak to the summer lows of consumption, so storage—a lot of it—is the only solution. In Beijing alone, winter gas demand is 11 times higher than summer demand. Related: Oil Markets Should Fear A Demand Shortage

Underground caverns are the obvious way to go, just as Europe and the United States have. The problem is that these are usually depleted oil fields and salt caverns, and there is a shortage of these in China. So, storage facilities need to be built from scratch.

The bulk of existing storage facilities—10 out of 13—are operated by CNPC, the state oil giant. It is currently boosting their capacity and building another seven sites, aiming to raise capacity to 15 billion cu m by 2025. It will also build another eight facilities with a combined capacity of 21 billion cu m in the future, although there is no timeline for these.

By Irina Slav for Oilprice.com

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  • Jay on March 20 2018 said:
    Maybe they should use some of that steel they've been dumping and build some storage farms, and they can buy the gas to fill those farms from us.....

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