BEIJING (Reuters) - China, the world’s No.3 gas consumer, is speeding up expanding its much-needed underground gas storage (UGS) facilities for the clean-burning fuel to cope with supply crunches in winter months when demand surges to heat homes.
Gas supplied from underground storages hit a record 7.4 billion cubic metres (bcm) during last winter’s severe supply squeeze, compared to an average of 4-6 bcm during the previous few winters.
China now operates 25 facilities with total designed working capacity of 18.9 bcm and working volume of 11.7 bcm, more than double capacity in 2015. Maximum daily extraction rate tops 90 million cubic metres.
At 11.7 bcm, it makes up less than 5 percent of the total gas consumed, well below the 20 percent for top consuming nations such as the United States and Russia.
As a comparison, one single storage run by Russian gas giant Gazprom has working capacity of 170 million cubic metres per day, larger than China’s total combined facilities.
PetroChina, the country’s dominant gas producer, built 23 of the 25 facilities, with the remaining two built by Sinopec, the No.2 oil and gas producer.
- First facility, Dazhangtuo at Dagang of northern China’s Hebei province, was put to use in late 2000, primarily to cope with supply disruption of the Shanxi-Beijing trunk gas line connecting gasfields in the Ordos basin with the capital Beijing.
- Most of the facilities were built using tapped gas wells or producing wells. Only a few use salt caverns which require higher building costs and longer construction periods. Building of one salt-cavern project, Jintan in east China’s Jiangsu province, is still in progress after construction began in 2005.
- Costs for building 10 bcm storages out of gas wells vary between 20-60 billion yuan ($3.2-$9.5 billion), depending on geological conditions. From site selection to construction, it takes between three to eight years to complete.
- Chinese gas wells for storages are typically deeper underground than in other countries, between 2,500 to 5,000 metres, with many located in the densely populated southwestern region.
- Near-term China will focus on boosting efficiency and utilization at current sites and serve mainly for peak seasonal demand, while planning strategic bases in a longer run.
- Storages in the United States and Europe are mostly independently run in a fully liberalised market that reflects price spreads between low and high seasons that give storage investors good returns. China’s market is state-controlled, with fixed premiums for winter pricing.
Below is a list of current storage sites sourced from PetroChina’s UGS institute.
($1 = 6.3261 Chinese yuan renminbi)
Reporting by Chen Aizhu. Editing by Lincoln Feast.