Trucked LNG - selling to the industrial sector
'Trucked LNG' is selling LNG into the industrial sector - distributing LNG ISO tanks by truck.
Outside of China, ISO tanks are mainly used to supply gas to remote locations where pipeline access is difficult. In other countries, this is not typically a major LNG or gas distribution channel as the cost of gas delivery through a pipeline system is often cheaper.
The situation is a bit different in China. Firstly, not all smaller industrial customers are connected to the gas grid. Secondly, the LNG distributed by ISO tanks is not subject to the regulated city gate prices.
The traded ISO tank market is quite liquid, with hundreds of LNG ISO tank distributors. There are WeChat groups trading volumes and transparency over pricing. So, even for industrial users that are connected to the gas pipeline group, trucked LNG can be a cheaper option.
However, there is a question over the sustainability of this business model. China's pipeline network is being expanded, and prices slowly liberalised. As such, there is a threat that some trucked LNG could be displaced by pipeline gas.
Trucks using LNG as fuel
Demand for LNG in the transport sector is also growing. In China, this growth is driven by three factors.
- City gas prices and LNG prices in several provinces are starting to become competitive with diesel.
- Policy changes mean there is increased demand for trucking generally.
- In some provinces, polices favour gas over diesel for trucking. In H1 2017, sales of LNG-fuelled trucks increased 500% year-on-year.
In both cases, new LNG business models are unlocking new demand.