China’s Massive Gas Stockpiles Shield It from
Middle East Supply Disruptions
Natural gas is hard to store, but China has
found a way to do it, while also developing alternate suppliers and expanding production
at home.
1.
Large-scale LNG storage infrastructure
o
China has built massive above-ground LNG tanks in
Yancheng.
o
Each tank can supply gas to Beijing’s population
for over two months.
2.
Strategic stockpiling approach
o
Part of a broader effort to stockpile key
commodities like:
§ Gas,
coal, rare earths, food (pork, rice)
o
Aimed at protecting against global supply
disruptions.
3.
Impact of Middle East conflict
o
Closure of the Strait of Hormuz disrupted global
energy flows.
o
China remained relatively secure, while countries
like India, Pakistan, and Vietnam faced shortages.
4.
Limited dependence on Hormuz route
o
Only 6.9% of China’s gas consumption comes
via the Strait of Hormuz.
o
Reduces vulnerability to geopolitical shocks.
5.
Diversified supply sources
o
Imports from countries like:
§ Australia
§ Turkmenistan
§ Russia
o
Extensive pipeline network from Central Asia and
Russia.
6.
Rising domestic production
o
China has significantly increased gas output via:
§ Fracking
§ Advanced
extraction technologies
7.
Alternative energy strategies
o
Heavy reliance on:
§ Coal (can
substitute gas)
§ Renewables
(solar, wind)
o
Only ~4% of electricity generated from
natural gas.
8.
Technological innovation in storage
o
LNG stored at -162°C in advanced tanks.
o
Gas expands 600 times when regasified.
o
China has built more large LNG tanks than the
rest of the world combined.
9.
Policy push for energy security
o
Driven by leadership under Xi Jinping.
o
Focus on self-reliance and strategic reserves.
10.
Industrial demand considerations
·
China is:
o
Largest gas importer
o
Major fertilizer and chemicals producer
·
Gas critical for industrial output.
11.
Demand-side adjustments
·
Lower residential demand due to:
o
Warm winters
o
End of heating season
·
Households account for <15% of gas use.
12.
Export controls as buffer
·
China reduced fertilizer exports to conserve
gas.
·
Ensures domestic supply stability.
13.
Remaining vulnerabilities
·
Lack of helium reserves (critical for
semiconductors).
·
Continued reliance on some Middle East imports.
Conclusion
China’s combination of massive LNG storage,
diversified supply, domestic production, and policy-driven energy security
has made it far more resilient to global energy disruptions compared to many
other Asian economies.
Two
rows of storage tanks the height of 20-story buildings, filled with liquefied gas,
help explain why China is better prepared than many countries to endure the interruption
of gas supplies from the Middle East.
Each
of six tanks in Yancheng, an industrial port, holds enough natural gas to meet the
household needs of Beijing’s 22 million people for more than two months. Adjacent
to them are four more tanks that are only slightly smaller.
The
storage tanks are part of a huge effort by China over the past decade to accumulate
stockpiles of all kinds of commodities, from pork and rice to rare-earth metals
and coal, in case of a disruption of overseas supplies. But the natural gas stockpiles
— the world’s largest above ground are in Yancheng, with more giant storage tanks
in southern China — are conspicuously important now. They have helped China cushion
the supply shock caused by the war in the Middle East even as its Asian neighbors, including India, Pakistan and Vietnam, are running
low on natural gas.
On
Tuesday evening, the United States and Iran reached a cease-fire deal that would
open the strait and allow tankers and other freighters carrying oil, gas and other
commodities to proceed through the Strait of Hormuz. The strait has been effectively
closed since the first U.S.-Israeli strikes on Iran five and a half weeks ago.
No
matter when regular traffic resumes, Qatar, a country on the Persian Gulf and one
of the world’s top exporters of liquefied natural gas, has said it may take years
to repair its gas facilities.
China
is the world’s largest importer of natural gas and the largest consumer of fertilizer,
much of which is made from natural gas. China also has the biggest chemicals industry,
much of which requires natural gas as well.
The
country has other supply options besides the storage tanks, which hold liquefied
natural gas brought in by sea. It has constructed pipelines to gas fields in Central
Asia and Russia. China has developed coal-based processes that can replace natural
gas in making some kinds of chemicals. And China has more than doubled its domestic
production of natural gas in the past decade through fracking and other technologies.
While
the United States now leads the world in oil and natural gas production by a wide
margin, China is the fourth-largest producer of natural gas, trailing only the United
States, Russia and Iran. China is the fifth-largest oil producer, behind the United
States, Saudi Arabia, Russia and Canada.
Chinese
government data shows that natural gas imports through the Strait of Hormuz represented
only 6.9 percent of the country’s overall gas consumption last year.
Beijing’s
top leaders have long been preoccupied with their country’s vulnerability to pressure
from the American or Indian Navy on their seaborne supply of oil and natural gas
from the Middle East. The country’s programs to develop solar and wind power and
electric cars as alternatives to oil all moved into high gear 20 years ago.
“They’ve
been thinking about this for a long time,” said Geoffrey Garrett, the dean of the
Marshall School of Business at the University of Southern California.
China’s
expansion of strategic stockpiles of fossil fuels is more recent, an effort pushed
by its top leader, Xi Jinping. He has uttered dark warnings about the challenges
facing the globe and the need for China to depend on commodities and technologies
found within its borders.
In
a speech in 2022, he called for China to “enhance coal, oil and gas storage capacity,
promote the large-scale application of advanced energy storage technologies, and
improve the capacity for self-sufficient energy supply.”
There
are gaps in China’s stockpiles. Chinese officials have discussed the creation of
a national reserve for helium, which is crucial to the manufacturing of
semiconductors. China imports large quantities of helium from the Persian Gulf,
and there has been no sign that China started a stockpile of the commodity before
Iran closed the strait.
China’s
natural gas reserves, together with imports from places that are not affected by
fighting in the Mideast, like Australia, Turkmenistan and Russia, are ample for
home heating and cooking. Households, including residential electricity use, represent
less than 15 percent of China’s natural gas consumption. China is also finishing
its second consecutive warm winter, and residential gas demand has dropped steeply
with the end of the heating season last month.
The
country generates only 4 percent of its electricity from natural gas, and can easily
replace that with coal and, to some extent, renewable energy. Within days of the
start of the U.S.-Israeli war on Iran, Premier Li Qiang, China’s second-highest
official, called for the country to “create a safe, reliable, green, low-carbon,
resilient, intelligent and flexible new power grid,” according to People’s Daily,
the official newspaper of China’s Communist Party.
Natural
gas is particularly difficult to store. The easiest approach is to keep it underground
by pumping it into salt caverns or into previously exhausted underground natural
gas fields near big cities. But China has few of these caverns and fields relative
to its enormous population.
That
has prompted it to pursue a technologically audacious strategy: storing enormous
quantities of supercooled gas as a liquid in aboveground storage tanks. The state-owned
China National Offshore Oil Corporation disclosed in December that it had built
18 of its largest size of storage tanks for liquefied natural gas — more than twice
as many as the rest of the world combined.
South
Korea is constructing seven equally large L.N.G. tanks about 75 miles south of Seoul,
to be completed in stages by the end of 2029. Japan has also begun building slightly
smaller storage tanks.
Each
of China’s superlarge tanks, including the six at Yancheng,
has a volume of 9.5 million cubic feet. By comparison, the arena at Madison Square
Garden in New York City has a volume of 6.2 million cubic feet.
The
row of enormous storage tanks in Yancheng holds liquefied natural gas at a temperature
of minus 260 degrees Fahrenheit, or minus 162 degrees Celsius. When the gas is allowed
to warm gradually to room temperature through a system of pipes, it expands 600-fold.
The tanks in Yancheng are connected to a long pier into the Yellow Sea to unload
L.N.G. from ships.
Papers
published in Chinese engineering journals reveal the design breakthroughs involved
in holding enormous quantities of supercooled natural gas, which can be explosive
if ignited or warmed too quickly.
Each
storage tank has an outer concrete frame to provide rigidity. Inside the concrete
walls is a second layer of flexible plates made from a special steel alloy with
a lot of manganese and nickel. Sophisticated robots weld the plates.
China
has one more tool to make sure it has enough natural gas: making less fertilizer
for export. Analysts say that since the start of the war in Iran, China has already
halted most of its overseas fertilizer sales.
While
farmers in the United States, India and elsewhere have expressed concern about
fertilizer shortages this spring, residents of villages near the Yancheng L.N.G.
storage tanks said they had plenty. At a nearby store, tall stacks of fertilizer
were displayed for sale.
The
fertilizer store’s salesman, who gave his family name, Liu, said China’s authorities
had made sure that fertilizer was abundantly available and that prices did not rise
too sharply.
“I
stocked up quite a bit of fertilizer in advance — after all, there’s a war going
on in the Middle East,” he added.