Nation to double LNG equipment imports

China, the world's largest gas importer, is set to double the import of liquefied natural gas equipment in the next five years, after shipments of the clean fuel doubled in the last two years on Beijing's concerted efforts to reduce carbon emissions, said a new industry report.

According to the Shell LNG Outlook 2019, China's LNG imports have played a significant role in absorbing the world's near-term supply growth. Continued need for investment in supply chains, however, is necessary to meet the long-term demand growth, said Maarten Wetselaar, director for integrated gas and new energy at Royal Dutch Shell PLC.

Coal-to-gas switching was the main reason for the substantial improvement in Beijing's air quality during the last five years, he said.

LNG continued to be the fastest growing fuel source in China with growth of more than 40 billion cubic meters and accounted for more than half of the gas demand growth in the country, said the report.

Demand was largely driven by industrial use, which accounted for 44 percent, and residential and commercial use at 38 percent, while the economic and environmental benefits also made LNG an attractive road transport option.

The use of LNG in transport is also growing, especially in the heavy duty transport sector. There are over 300,000 LNG-powered trucks and buses on the road in China, and they consumed some 6.7 million metric tons of LNG last year.

According to Steve Hill, executive vice-president of Shell Energy, China's burgeoning gas demand has been beneficial for the whole LNG sector. As a major supplier of LNG to China, Shell currently sees a greater presence in the country's LNG sector, rather than the pipeline gas sector.

In response to China's attempts to create a giant oil and gas pipeline company this year, which is part of the nation's efforts to reform the State-owned petroleum industry, Hill said he believed that a single company responsible for infrastructure in many successful gas markets has many benefits, as pipelines can be operated more efficiently at lower costs and investments become more effective, allowing companies to compete on an equal basis.

An efficient pipeline system and a competitive market based upon this will lead to the rapid development of the oil and gas sector, and potential opportunities created by the new pipeline company would boost Shell businesses in China, he said.

Energy research and consultancy company Wood Mackenzie has forecast that the gas market in China will be as large as the European gas market within the next 10 years. Energy companies at home and abroad are taking action to leverage the bullish long-term picture painted by the government.

"Despite no details of the pipeline company being released yet, we are looking forward to a mechanism that allows participants to meet their obligations and allow new players, so that investments can be placed in the most effective place," he added.

The new oil and gas pipeline company, which is likely to be established around the middle of this year, will operate in a market-oriented manner after the acquisition of the related assets from the country's three national oil companies, including CNPC, Sinopec and CNOOC.

Na Min, a senior analyst for oil and gas at Bloomberg New Energy Finance, believes the new pipeline company will speed up construction of the pipeline network, while granting third-party access to incentivize upstream investment and further unlock resource potential.