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The Development Pattern of China
The Development Pattern of China's LNG Industry

China's strategy of developing natural gas is unquestionable

China's development of natural gas at the turn of the century is a strategic requirement to realize the scientific outlook on development. It is a major demand to improve the environment and improve energy efficiency. China's environmental pollution caused by coal accounting for 70% of the energy structure has been extremely serious. Energy efficiency 33.4% is well below the world average of 42% and rich-world 52-55%. The conversion efficiency of coal is much lower than that of natural gas. In recent years, although China's efforts to develop renewable energy such as nuclear energy, solar energy and wind energy have attracted the attention of the world, but these energy sources are limited by resources, technology, equipment and so on, and the share of energy in a single energy is hard to increase rapidly. The natural gas has the advantages of CO2, SO2, NOx emission minimum, the highest energy efficiency (up to 80%), and it has the most possible high-speed development. Accelerating the development of natural gas is the most powerful strategic choice for China to optimize its energy structure and reduce emissions. In 2006, the proportion of natural gas in a single energy composition was 23.7%, compared with 3.2% in China. According to China's energy plan in 2004, natural gas accounted for 6% and 12% of total energy consumption in 2010 and 2020 respectively, and the consumption amount is 220 billion m3 in 2010. However, based on the trend of total energy consumption growth in the last four years and the resource and environment constraint conditions, the total energy consumption/natural gas consumption in China will be: 3 billion tons in 2010 and 130 billion m3; 3.5 billion tons of coal /320 billion m3 by 2020. This strategic goal must be realized, and can be achieved. This is the basic requirement of China's economic and social sustainable development, which cannot be changed.

Analysis of production and supply pattern of natural gas resources

The level of natural gas in China is still low. In recent years, with the continuous innovation of exploration and development theory, technology and equipment, 5 of surige and priguang gas fields have been discovered successively, and production continues to grow rapidly. In 2007, it reached 693.1 m3.

Especially in the near term, China's natural gas growth depends mainly on exploration and development of gas fields. However, China's special geological conditions have resulted in many small and medium-sized gas fields of more than 10 billion m3; It is not economical to rely on pipeline collection. However, it is currently developing a mature, direct and deep cold purification/liquefaction for LNG, and the market operation mode of supplying users through the tanker transport/satellite gasification station, it is moving faster in China than anywhere else in the world. So far, a dozen LNG trucking companies and hundreds of satellite stations have been operating. In addition, China's coal bed methane resources amount to 36.8 trillion m3, according to the current conservative planning, with a capacity of 10 billion m3 in 2010 and 40 billion m3 in 2020. The same as small and medium-sized gas fields, some of them are connected to the natural gas pipeline network and some liquefy into the LNG market. If the conditions of private access are released, the momentum of development will be further accelerated. It is the main supplement to the production of gas field. The above domestic resources will satisfy most of the planning requirements. The rest will need to be replenished through onshore pipelines and offshore LNG imports.

The price of domestic and imported natural gas/LNG is gradually bridged and the regional difference is formed

In recent years, the price of natural gas LNG in international market has soared with oil price, and the gap between domestic and foreign gas prices has increased. Many are beginning to doubt the domestic affordability of LNG imports. In fact, the inevitable trend of China's natural gas policy and the realistic "geo-market" situation will gradually close the price difference between domestic natural gas and imported natural gas/LNG. This is because, on the one hand, China will gradually increase the resource tax on oil and gas in line with the market mechanism to protect resources and curb inefficient use. On the other hand, as the yuan changes against the dollar, the price of dollar-denominated international markets will fall.

1) The resource tax will eliminate the price difference between domestic and imported gas in the west. For example, in accordance with the contract for the settlement of the dollar, the import of the gas wellhead of Turkmenistan is $195/1000m3 and the overseas pipeline costs $50/1000m3; The border gate price is $245/1000m3. By 2010, if the dollar/RMB exchange rate becomes 6.0, the gas price of RMB is 1.47 RMB/m3. Suppose that the resource tax on domestic gas at the time of 0.5 RMB/m3 (equivalent to 33% of the tax rate) is the same as that of imported soil. Gazprom is negotiating, but the gas field is close to the border and should not be more expensive than the gas.

2) The gas price of the coastal economic developed area is higher than that of the northwest. Just compensate for the difference in affordability. West gas to Shanghai more than 4000 kilometers, the pipeline fee will increase to 1.0 yuan/m3. If the western windpipe is exported to the southeast coast, the gate station price will increase to about RMB 2.5/ m3. At present, the terminal will be sold at 3.9 yuan/m3, and the city gas and ceramic industry users can bear it.

3) Coastal economically developed regions can also bear the price of imported LNG with high international oil prices. Even when the price of oil reached $100 a barrel, the LNG price was $18.5/ MMBTU, more than six times the price of the Dapeng contract. But if the dollar is at 6, it is at 3581/t, or 2.78/ m3, which is also much cheaper than the corresponding LPG of 7940/ t.

Estimated size of LNG development

With the rapid development of coal bed gas, small and medium gas pipeline transport/liquefied tanker transport, the second market expansion, the price of natural gas terminals in China, which is dominated by the market mechanism, will eventually form due to local resources, market and economic development. It is estimated that in 2020, four of the 320 billion m3 natural gas will be composed about: The major gas fields in China are 1500-1800, CBM and small and medium-sized gas fields 300-500, import pipeline gas 800-1000, import lng500-600, lng4000-50 million tons/year, that's 10 times what it is now.

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