China National Offshore Oil Corporation (CNOOC) is reportedly preparing for a winter fuel crunch by spending $10 million on leasing two LNG tankers to store additional reserves of the chilled fuel.
The move has been described as an insurance to cover winter demand spikes, Reuters reports citing a source close to the matter.
The two vessels leased some months ago are the Cool Explorer and Neo Energy, with a 150,000 cubic meter capacity each, for a short-term period between mid-November 2017, and mid-March 2018.
The demand spikes are expected as Chinese government decided to switch from coal to natural gas to heat millions of households in the northeast regions of Tianjin and Hebei. It is also pushing factories to use gas boilers.
The two tankers will be stationed between Tianjin and Ningbo LNG terminals, however, their location might change if they have to pick up new supplies.
However, the decision to hire LNG vessels to store reserves of the chilled gas is seen as unusual from the cost perspective as LNG tankers are some of the most expensive and keeping the LNG at an adequate temperature also comes at a significant cost. In addition, due to the market conditions, the sales price of the stored LNG volumes would drop below the purchase price.
But, this is not the first time CNOOC has hired a vessel to store additional volumes, as it had already hired one LNG carrier last year for the same purpose.
In November, CNOOC renewed its contract for the FSRU GDF Suez Cape Ann with the French energy giant Engie. The FSRU arrived in Tianjin fully loaded with LNG and started operations on October 28, and will remain in the Chinese port until spring 2018.
LNG World News Staff