Underground storage proposed to end winter gas crunch

China should step up the construction of underground gas storage facilities to meet increasing demand during the peak consumption period in winter, according to Zhang Mingsen, former deputy chief engineer of the Beijing Research Institute of Chemical Industry under the State-owned oil giant China Petroleum and Chemical Corp.

The government should provide fiscal and tax subsidies for the construction of underground gas storage facilities and improve the pricing mechanism for natural gas to achieve a more open gas market system, said Zhang in his suggestions to the National Committee of the Chinese People’s Political Consultative Conference.

China consumed 280.30 billion cubic meters of natural gas in 2018, up 18.1 percent year-on-year, according to the National Development and Reform Commission, the nation’s top economic regulator. The increase is in line with the country’s aim to encourage the use of gas instead of coal to combat air pollution.

It aims to increase the share of gas in its energy mix to 10 percent of the nation’s primary energy demand by 2020, according to the commission.

“Demand for gas has surged in China in recent years, which has posed a potential threat to the country’s energy security. Underground gas storage, on the other hand, could well meet the peak for gas consumption and is a necessary part of the natural gas industrial chain,” he said.

“Sufficient storage facilities and competent peak load regulation capacity is necessary for a stable supply of natural gas.”

According to Zhang, major gas consumers around the world have set up gas storage systems, with gas in storage contributing more than 10 percent of annual gas consumption.

Bloomberg Intelligence estimated earlier that nationwide gas storage will rise to 4.1 percent of demand in 2020, compared with 2.8 percent in 2015.

While China is already the world’s biggest gas importer, with 125.4 billion cu m of gas shipment last year, a year-on-year increase of 31.7 percent, it has only 26 gas storage sites with just 8 billion cu m in storage as of 2018, contributing 3 percent of the country’s total gas consumption.

Analysts believe insufficient infrastructure, including underground gas storage and natural gas pipelines, is standing in the way of a more open and liberalized domestic gas sector in the country.

Li Li, research director at energy consulting company ICIS China, also suggested that the government should encourage the construction of gas storage tanks to prevent future gas shortages during cold snaps, considering the country’s high dependence on oil and gas imports.

To ensure sufficient gas supply, the country’s national oil majors are also ramping up local oil and gas output, adding thousands of wells at oil basins, shale rocks and deepwater fields nationwide.