PetroChina shuts two liquefaction plants as it reviews LNG push
Investment into using gas to refuel trucks and ships hit by rising costs and slowing economy
Energy firm PetroChina is reviewing its multibillion-dollar push to produce liquefied natural gas (LNG) to fuel trucks and ships in place of diesel, shutting two major gas liquefaction plants, sources said.
Seen just a year ago as a fast-growing profit engine, PetroChina unit Kunlun Energy is reconsidering its investment because of rising costs and the mainland's slower economic growth, two sources said.
The mainland, which controls energy prices to curb inflation, has increased wholesale natural gas prices by 33 per cent since the middle of last year as part of its long-term market reforms. That has raised the cost of gas feedstock for Kunlun, which sources the fuel from small producing fields or pipelines tapping large onshore basins.
While the price reforms have been well-flagged, the mainland's economic slowdown has been deeper than expected, eroding end-user demand for LNG as a transport fuel.
The sales prices for LNG could not catch up with those of feed gas
Analysts say the challenges faced by Kunlun show that the impact of price reforms - as the mainland moves from a centrally planned economy to a market-driven one - can produce an unintended effect.