China’s underground gas storage build has accelerated – what’s needed next?
Underground gas storage facilities construction has accelerated in the past two years thanks to policy mandates, renewed concerns over energy security, NOCs’ commitment, further deregulation in gas pricing and wider seasonal price spread. Market-based mechanisms are being introduced to underground storage to improve its operations and returns. For storage service, PipeChina offered storage capacity to third parties via auctions on gas exchanges and disclosed the floor prices for storage services. For storage investment, partnerships and mixed ownerships of underground storage assets appear. Investment challenges still exist, including large up-front investment, poorer geological settings and uncertain returns. PetroChina, Sinopec and PipeChina drive underground storage investment. By 2035, underground storage capacity is expected to reach 89 bcm. Together with coastal LNG and inland CNG storage, the total capacity will reach 118 bcm, equivalent to 19% of projected annual gas demand