Kunlun Energy Builds China‘s Biggest Onshore Liquefaction Plant

Kunlun Energy Co Ltd , controlled by energy giant PetroChina Co Ltd , will in June start a 2-million-cubic-metre (mcm) per day natural gas liquefaction plant, according to an official managing the project, the largest of its kind in China.

The world's top energy consumer has over the past decade developed facilities near marginal onshore gas reservoirs that chill the fuel into a liquid then transport it to factories and residents beyond the reach of pipeline grids.

These plants differ from multi-billion-dollar liquefied natural gas (LNG) terminals, located at ports to receive similar super-chilled fuel imported by ship, which vary in size between 2.6 million tonnes per year (tpy) to 6.8 million tpy in receiving capacity.

Kunlun's plant in Yan'an, in the resource-rich northern province of Shaanxi, is equivalent to 500,000 tpy. It is the first facility of this scale based on domestic liquefaction technology, the official, declining to be identified as he was not authorised to talk to media.

Some previous plants have used technology from companies such as Germany's Linde AG, France's Technip SA and U.S. firm Black and Veatch Corp.

The Yan'an plant would set a precedent for bigger LNG plants Kunlun Energy is planning, including a 2.2 mcm per day plant in eastern Shandong province and a 5 mcm p e r day plant in central Hubei province.

Data on small LNG plants is scanty. Industry players have estimated that by the end of 2010 China had close to 20 mcm per day in total liquefaction capacity, about 7 percent of total gas demand.

China meets most of its gas demand via piped gas from domestic production and Turkmenistan ,and imported LNG.

Previously dominated by local, independent investors, the trucked LNG business has recently caught the attention of big state oil companies such as China National Petroleum Corp and China National Offshore Oil Corp, utilising gas reservoirs that are not big enough to merit a pipeline, or coal bed methane projects.

Hong Kong-listed Kunlun Energy, headed by a vice president of PetroChina, has become a leading player in the sector. It builds gas liquefaction plants, operates LNG receiving terminals, trucks the fuel and builds LNG filling stations.

The booming trucked LNG business is now targetting the country's tens of thousands of trucks, city buses and fishing boats as users, aiming for an ambitious 10 percent of China's transport diesel market by 2015.

Transport or auto diesel makes up more than half of China's total diesel consumption of about 3.4 million barrels per day (bpd).

(reuters.com, Edited by Topco)