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Eric Ng

Growth in sales of liquefied petroleum gas (LPG) in Guangdong is set to decline and volumes may even fall in absolute terms in some of the province's main cities, analysts say.

LPG,  a major fuel source for households, would face growing competition from liquefied natural gas (LNG) after the China National Offshore Oil Corp-led  processing terminal came on stream in the middle of next year, they said.

Speaking at a gas conference  on Friday, Helen Liang Haishan, director of the gas department at Guangdong Oil  and Gas Association, said the extent of the decline in LPG sales would depend on the number of LNG terminals that would emerge.

China National and its partners, including global energy giant BP, are building  an LNG plant in Shenzhen, and more may follow.

LNG is a chilled and pressurised form of natural gas, which can be transported by tankers across continents or by trucks on land.

'There are several LNG import projects along coastal Guangdong that are being planned so the impact on LPG sales may be bigger than currently envisaged. But the ultimate impact will depend on the number and scale of projects that will be approved and the market segments they will target,' Ms Liang said.

About 55 per cent of the first phase of the Shenzhen LNG terminal is expected to supply power generators which do not use LPG.

In the Pearl River Delta, the primary market of China National's LNG regassification terminal in Shenzhen, sales of LPG is expected to fall from next year onward.

LNG costs 3.33 yuan per  10,000 calorific value, cheaper than the 3.87 to 5.2 yuan per 10,000 calorific value of LPG, according to the association. LPG is either produced from oil and gas fields in a naturally occurring form, or is derived from the oil refining process.

While Ms Liang would not name the Guangdong cities that are mulling LNG projects, China National earlier announced that it had signed a preliminary agreement with Shantou's municipal government to  explore the feasibility of building a terminal.

The first phase of the Shenzhen terminal will be able to regassify 3.7 million tonnes of LNG a year, while phase two will add 6.2 million tonnes of annual capacity.

Also tapping Guangdong's gas market is privately owned Xinjiang Guanghui LNG Development, which plans to sell four billion cubic metres of natural gas from Xinjiang province to various coastal and central provinces. Ms Liang said LPG demand in  Guangdong should  to rise until at least 2012 as areas other than the Pear River Delta picked up the slack.



Fall in LPG sales seen as rival fuel gains