Industry Insights | Towards Carbon Neutrality, Liquefied Natural Gas Leads the Green Revolution

Liquefied Natural Gas (LNG) refers to a low-temperature liquid mixture formed by pre-treating natural gas raw materials, removing impurities, and then subjecting them to cryogenic freezing at -162°C. Its main component is methane, with small amounts of ethane and propane also present. The LNG industry involves the entire industrial chain related to the production, liquefaction, storage, transportation, and sales of natural gas. Natural gas is a clean and efficient energy resource that can significantly reduce its volume after liquefaction, making it suitable for long-distance transportation and storage. Therefore, the main task of the LNG industry is to convert natural gas from a gaseous state into a liquid state for trade and transportation in domestic and international markets.

Liquefied natural gas (LNG) has many advantages, including being clean and environmentally friendly, flexible in storage and transportation, and safe and reliable. Compared to fuel oil, LNG is more environmentally friendly, producing fewer particulate emissions, noise, and carbon dioxide; compared to gasoline, LNG has a higher ignition point and explosion limit, making it safer. In addition, as a supplement to pipeline gas, LNG can be conveniently transported to areas without network coverage. LNG has a wide range of applications and can serve multiple civilian fields such as residential daily life, heating, and power generation, as well as industrial manufacturing and transportation. China's LNG production is mainly distributed in North China and Northwest China. In 2022, the top five provinces in terms of cumulative LNG production were Inner Mongolia, Shaanxi, Shanxi Province, Sichuan Province, and Xinjiang.

The liquefied natural gas (LNG) industry chain is a complete capital and technology-intensive industrial chain that runs through the entire process of the natural gas industry. It mainly consists of three links: upstream natural gas raw materials, midstream LNG processing, and downstream LNG sales and applications. Specifically, the upstream of the LNG industry chain includes domestic natural gas suppliers, natural gas pipeline operators, etc. Natural gas pipeline operators transport natural gas produced and imported from local natural gas suppliers to LNG plants in the midstream for processing and liquefaction. Chinese LNG plants can be divided into self-operated and contract-operated types, and ultimately, liquefied natural gas transport vehicles transport the liquefied gas to wholesalers for sale or directly sell it to downstream residential and non-residential customers.

China's liquefied natural gas (LNG) consumption increased from over 20 million tons in 2018 to over 30 million tons in 2022, with a compound annual growth rate greater than 10%. Benefiting from favorable policies such as encouraging the use of LNG-powered vehicles and natural gas replacing coal, LNG consumption has maintained a high growth rate over the past five years. At the same time, China will further promote the diversification of LNG applications. In addition to traditional industrial and residential uses, LNG applications in the transportation sector will continue to expand, including buses, logistics transport, port ships, etc. In addition, LNG applications in fields such as cogeneration, energy storage, and chemicals will also be promoted. It is expected that by 2027, China's LNG consumption will further increase to nearly 50 million tons.

China's liquefied natural gas production increased from about 9 million tons in 2018 to over 15 million tons in 2022, with a compound annual growth rate of about 20%. In the future, China's liquefied natural gas production is expected to expand at a compound annual rate of about 10%. With the improvement of the overall supply chain, technology research and development, and equipment manufacturing levels of domestic liquefied natural gas manufacturers, the domestic liquefied natural gas supply market will develop rapidly and reach a scale of over 25 million tons by 2027.

In addition to the development of the supply side, China will further promote the diversification of liquefied natural gas applications. Apart from traditional industrial and residential uses, the application of liquefied natural gas in the transportation sector will continue to expand, including buses, logistics transport, port ships, etc. In addition, it will also promote the application of liquefied natural gas in fields such as cogeneration, energy storage, and chemicals; increase investment in liquefied natural gas technology research and development, equipment manufacturing, and process improvement to improve the overall level of the liquefied natural gas industry chain. Leading enterprises in the liquefied natural gas industry are actively expanding their industrial chains, gradually entering upstream gas source areas and downstream consumer sectors through the construction of liquefied natural gas receiving stations, international liquefied natural gas trade, and the expansion of liquefied natural gas filling stations.

As China's liquefied natural gas industry gradually matures and expands, the scale-up of storage tanks has become the main trend in liquefied natural gas storage technology both domestically and internationally. In addition, according to different market, positioning, and environmental needs, in the coming years, China's liquefied natural gas industry will rapidly develop and apply technologies such as bimetallic full-containment tanks, underground storage tanks, thin-film storage tanks, all-concrete storage tanks, new self-supporting storage tanks, and offshore storage tanks. The research and development of new liquefied natural gas storage and transportation technologies will meet the needs of different scales and uses. At the same time, the design, construction, and operation of liquefied natural gas receiving stations will also develop towards innovative technology fields such as cloud computing, big data, Internet of Things, mobile internet, and artificial intelligence.

At present, China has a high external dependence on liquefied natural gas (LNG). In the future, China will further introduce more supply sources to achieve diversified supply and reduce supply risks. At the same time, competition between LNG receiving stations and natural gas liquefaction plants is gradually intensifying. The LNG market is gradually getting rid of its dependence on pipeline gas and showing an independent development trend. Under the dual carbon policy, all industries in China are vigorously advocating green and environmentally friendly development concepts, and the recovery and utilization of associated gas from oilfields have also become an important task within the natural gas industry. Through the recovery and treatment of associated gas from oilfields, natural gas manufacturers can reduce their cost inputs, improve oilfield processing efficiency, and achieve the goal of energy conservation and emission reduction. It is expected that the proportion of scattered gas processing and utilization in China will continue to increase in the future.