China Bets on LNG Bunkering

2018 08 15


In keeping with its broader push for a natural gas-fueled economy, China's government is putting its considerable influence behind LNG as a marine fuel. On Friday, China's Ministry Of Transport released a timetable for creating a full-scale LNG bunkering infrastructure system by 2025, with a focus on riverine vessels.

The plan calls for developing LNG bunkering standards and an initial network for distribution by 2020. By 2025, it envisions LNG bunkering for 15 percent of new government-owned vessels and 10 percent of the shipping on the largest inland waterways. The busy Bohai Bay region will also be an initial area of focus.

China's LNG import volume is soaring as it moves to fulfill growing domestic demand for gas, and analysts predict that it could exceed 65 million tonnes per annum by 2023. Part of this liquefied gas supply could be diverted for bunkering, without requiring local liquefaction terminals.

Inland bunkering terminals in China will also have access to the world's largest LNG trucking market. According to Wood Mac, China's LNG truck tanker fleet carried 19 million tonnes of gas in 2017, and it plays an important distribution role in areas where pipeline coverage does not yet exist. In the U.S. and Europe, several LNG bunkering initiatives have started off by using truck deliveries at the pier.

Dropping U.S. cargoes

On Sunday, Bloomberg reported that Chinese oil firm CNPC may stop taking delivery of U.S. spot cargoes of LNG this winter in order to avoid the Chinese government's 25 percent tariff on U.S. LNG. Instead, it would swap cargoes with other buyers in the region, trading U.S. LNG for gas from another overseas producer, or buy spot cargoes directly from non-U.S. sources.

CNPC's PetroChina division has a 25-year supply contract with U.S. producer Cheniere, which is due to enter into partial effect later this year. The agreement calls for CNPC to buy 1.2 mtpa of Cheniere's LNG, with part of the supply beginning in 2018 and the rest beginning in 2023.

Separately, PetroChina is said to be in talks with leading LNG supplier Qatargas to buy cargoes under a short term four-year agreement. Prices have not yet been set, but the volume would be in the range of several million tonnes per annum, according to Reuters. The parties are also reportedly negotiating an additional long-term purchase agreement.


The Maritime Executive


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