Driving up demand for LNG vehicles

Tom McGregor

Recent global discoveries of massive shale gas reserves along with more innovative drilling techniques known as fracking has boosted natural gas (LNG) supplies. However, more infrastructures is necessary to utilize the increased supply.

China will embark on a bold strategy to encourage auto companies to manufacture at least 1.5 million natural gas-powered vehicles in the country by 2015. If this dream turns into reality, the country could transform into the world's largest market for natural gas automobiles.

LNG vehicles can reduce carbon emissions, since it's a cleaner and cheaper burning fuel. Even a major player in the Texas oil and gas industry is touting a similar plan in the United States. Billionaire energy tycoon T. Boone Pickens has dubbed his proposal, The Pickens Plan.

Related reading: China to have 1.5m natural gas vehicles by 2015

"From the beginning, the Pickens Plan was focused like a laser on getting American 8-million heavy-duty trucks on domestic natural gas, rather than continue to run on imported diesel," he wrote in the Houston Chronicle.

He added, "using natural gas as a fuel for 18-wheelers was a good idea at $12 per Mcf. Using natural gas as a fuel for the over-the-road trucks at $3 per Mcf is cheaper than imported diesel by a full $1 equivalent."

Apparently, Beijing appears to endorse the concept, since the US Energy Information Agency had announced that China holds the world's largest shale gas reserves with recoverable resources estimated at 1,275 trillion cubic feet.

China has yet to extract much of its shale gas reserves, but that is expected to change in the near future. By manufacturing more LNG vehicles, the country could avoid a glut in the natural gas market.

In late October, Chongqing Municipality played host to a natural gas auto forum. Experts said the country has more than one million natural gas vehicles on the road and it averages 100,000 new vehicles built each year, according to Chinese media reports.

Nevertheless, the LNG auto strategy could hit some road bumps, since as of 2011; only about 3,000 natural gas filling stations are located nationwide. But, we can expect to see more LNG fuel stations soon.

However: Will the fuel pumps be State-owned or privately owned? Will there be a consistent supply chain? Will it lower fuel costs for drivers? Many LNG experts in the country are working hard to ensure that logistics network issues could be resolved.

Yao Mongde, director of China Road Association, said, "China has already formed a complete industrial chain. It includes natural gas compression and liquefaction as well as in storage and transportation, and the manufacturing of natural gas cars and their parts and accessories."

The National Development & Reform Commission is leading the "LNG Revolution" for the transportation sector with natural gas vehicles that would include buses, taxis, trucks and even shipping vessels, as disclosed by its website.

China is the world's largest energy consumer and trying to reduce its pollution. Raising demand for more LNG consumption could play a pivotal role.

"The world's top energy user is poised to triple natural gas use to meet about 10 percent of total energy by the end of this decade, to cut emissions from coal use," as reported by Reuters.

China's oil and gas companies - CNOOC Ltd, PetroChina and Sinopec Corp - are building refinery plants to liquefy natural gas from shale gas fields that are located far away from main pipeline networks, and LNG tankers truck them across the nation for end users.

Reuters reports, "in the eastern province of Jiangsu alone, the number of LNG-fuelled vehicles is expected to exceed 6,000 by 2015. Southern Guangdong province wants to replace LPG, a more costly refinery product, with LNG for buses."

The NDRC's natural gas plan seems ambitious but worth the effort. The US has enjoyed having an abundant supply of natural gas, and it's becoming more essential for China to take advantage of lower LNG costs by manufacturing more eco-friendly vehicles.

If successful, trucks, taxis and buses fueled by natural gas could rev up a stronger engine for national economic growth.

The views do not necessarily reflect those of China Daily.

McGregor@chinadaily.com.cn