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LPG to China will go on rails

Russian liquefied hydrocarbon gases will be exported by rail

LPG to China will go on rails
Photo: TonyV3112 / Shutterstock.com
Russia has a significant surplus of liquefied hydrocarbon gases (LPG), which will only increase in the medium term. The implementation of projects to increase the volume of hydrocarbon processing in Russia leads to an increase in LPG produced from it. According to statistics, for 2014 year in our country was produced 12,8 million tons of LPG, of which only 5,3 was exported. But this does not stop a number of large companies from creating new LPG production facilities. Among the initiators are the Irkutsk Oil Company, SIBUR, Rosneft and others.


Asian vector
"The Asia-Pacific region is the most promising for increasing sales and diversification of supplies," the East LPG Company believes. In North-East Asia, the growth in demand for liquefied petroleum gas (LPG) has been observed in recent years, not only in industry, but also in the commercial and domestic sector.

In the framework of the conference "Russian LPG Market: New Frontiers of Development", the head of the IHS petrochemical company, Dmitriy Styrkas, stressed that in the near future the demand for LPG will continue to grow in the world, the leading position will belong to Asia.

The expert also cited data that China's household and commercial consumption of LHG is growing rapidly. If in 2010 year the indicator of consumption by this parameter was a little more than 25 million tons per year, at the moment it is close to 40 million tons per year. According to analysts of the company, by 2025 year the demand in China will increase to 60 million tons per year.

The general director of Avestra Chemical Commerce Trading Co. Qi Jianhong notes that the sharp change in oil prices in the 2014 year has had a significant impact on the LPG market, however, since the beginning of 2016, this effect has decreased. Today, the price of LPG in the Chinese market has come close to the cost of imports from the Far East, the price difference has become less noticeable. The volume of imports has greatly increased, the total volume of imported LPG with the forecast for 2016 year is estimated to be up to 15 million tons.

Total supplies of liquefied hydrocarbon gas to China in January-May this year, according to the Argus agency, increased by 2,35 million tons, or by 57,2%, compared to the same period of the 2015 year, to 6,45 million tons, due to the increased demand for propane from the petrochemical enterprises . The volume of supplies of propane to China increased for five months by 1,73 million tons, to 4,70 million tons, which is 72,9% of the total volume of gas imports to the country.

It is noted that in the first half of this year, import LPG parties from the USA, the countries of the Persian Gulf, Australia, Malaysia, Nigeria and Algeria continue to arrive in China.

"Russia has restrictions on transportation, currently only a small amount of LPG is imported to China by land transport. Next year, the volume of imports will increase dramatically, "said Qi Jianhong. According to the customs statistics provided by Qi Jianhong, from January to September of this year the total volume of LPG imports exceeded 11,8 million tons. The import flow now goes mainly to the south of China. However, with the increase in enterprises that deal with the dehydrogenation of propane, there will be a redistribution of commodity flows.


Logistical obstacles
In fact, the situation has developed so that with a large number of available LNG transshipment capacities in Russia and China, there are currently no direct opportunities for LHG supplies. Large terminals for LHG transshipment are concentrated in the south of China, and in Russia at the moment they are on the coast of the Black and Baltic Seas. The most famous and large ones are the terminals in the city of Temryuk "Maktren-Nafta", in the Taman port "OTEKO", 4 terminal in Kerch and the terminal belonging to the SIBUR holding for transshipment of oil products in Ust-Luga.

The situation with the supply of Russian LPG to China is not easy. In July 2014, SIBUR started to deliver the first type of fuel to China from Russia - sent a test lot by rail. And at the end of August the company signed a contract with one of the Chinese consumers, which allowed to organize regular supplies of these products to the growing Chinese market. Deliveries were made from the Nyagangazpererabotka plant by rail. The volume of deliveries at the first stage amounted to about 20 thousand tons per year with the prospect of further increase.

The specifics and complexity of the organization of this route are related to the lack of LPG transshipment points on the border between Russia and China. In this regard, the company decided to deliver in tank containers with their subsequent transportation on road platforms across China. "The organization of LPG supplies to China is the next step aimed at further expanding the sales markets for liquefied hydrocarbon gas in connection with the expected increase in LPG production," noted in 2014 in SIBUR.

As noted in the SIBUR report, the first test shipment confirmed the economic efficiency of LPG transportation under this scheme. However, already in 2015, Sibur CEO Dmitry Konov said that the issue of concluding long-term contracts for the supply of liquefied petroleum gas (LPG) to China is not on the agenda, as, as it turned out, logistics problems have not been resolved.

"The volume of supplies is minimal: taking into account the fact that we produce 4-5 million tons of LPG, we sell 3 million on the market," 20 thousand are insignificant supplies, "Konov said, according to which the Chinese market for LPG consumption is estimated at 15 million Tons.

It turned out that LPG is supplied by the company in a complex scheme, which uses both rail and road transport. Given the difference in gauge in Russia and the PRC, the project on the outcome did not become sufficiently effective from the point of view of logistics and the cost component.




Manchuria will become the center of LPG transshipment
At the above-mentioned conference "Russian LPG Market: New Frontiers of Development", two projects aimed at providing logistics for LPG exports from Russia to China were identified at once. Interestingly, one is created with a view to sea transportation, and the other - to rail.

For example, the general director of Avestra Chemical Commerce Trading Co. Qi Jianhong presented new opportunities for delivering LPG to the Chinese market through Far East Gases terminal. To optimize land logistics, a large Manzhouli Far East Gas terminal in Chinese Manchuria, in the immediate vicinity of the railway border crossing with Russia, may be launched in the near future. It is expected that the capacity of the terminal will be up to 2 million tons of LPG and propylene per year. The terminal has an area of ​​more than 32 hectares, on which 10 tanks are built in the volume of 2000 cubic meters. In two tanks there will be storage of propylene, in two - propane, in six - butane.

This project sounded at the first Eastern Economic Forum - just then, in 2015, a trilateral agreement on the intentions of cooperation in the field of propylene supplies and various LPGs to China was signed by Rosneft, Avestra Chemical and Manzhouli Far East Gas Co. Ltd. (Far East Gas).

The document strengthened the parties' intentions to assess the prospects: long-term supplies of LPG and propylene produced by Rosneft in volumes from 60 to 200 thousand tons per year from Russia to China through Manchuria and the use of Far East Gas's capacity for LPG and propylene transshipment after it was put into Operation in the supply chain of these petroleum products.

One of the holding's shareholders is Manchurian Far Eastern Gas Company LLC, a joint Russian-Chinese company. The founders are 4 companies, the scope of which is the reception, transshipment and delivery of LPG and propylene to the end consumers in China.

Initially, it was assumed that the capacity of the new terminal will be 3 million tons per year, but according to the figures presented by Qi Jianhong, it will be about 2 million tons of LPG and propylene per year. Regarding the financial component, the Chinese representative notes that after the launch of the terminal, it plans to increase the volume of mutual trade between Russia and China amounting to at least 1 billion dollars per year.


Free port will receive gases
Also in mid-summer 2016, the Far East Development Corporation signed two agreements on the implementation of activities in the Freeport of Vladivostok with Vostok LPG LLC and Terminal LLC for a total of 4,6 billion rubles.

Thanks to the resident of LLC Vostok LPG in Khasansky district of Primorsky Krai (Perevoznoye village), on 20 hectares of land will be built a marine terminal and infrastructure for LPG exports. Deliveries will be made to the countries of the Asia-Pacific region by sea. The total amount of investments, as noted earlier, will be 4,5 billion rubles.

The technical director of Vostok LPG, Abi Zhivs, talked about the construction of a terminal for LHG transshipment in Primorye and the state of the project at that time. According to him, from 2017, Vostok LPG plans to begin construction of a terminal that will ensure the receipt of LPG delivered by rail in tank wagons, temporary LPG storage in a tank farm under pressure, and gas transfer to gas carriers for further delivery Consumers.

Regarding the technological scheme of the project, the terminal will consist of three main objects: a storage base, a gas pipeline and water treatment facilities. The storage base will consist of a fleet of 27600 cubic meters, its own railway track, drainage and loading platform for simultaneous processing to 72 wagons, a tubing section, an internal gas pipeline system and its own electric substation with an output of 3200 kW. The gas pipeline will consist of two threads - for the liquid and vapor phases. The design capacity will be 960 thousand tons per year.

"The terminal will be equipped with the latest technology and will use advanced technologies in the field of LPG transshipment with the involvement of world leaders in the production of equipment," says Abi Zhivs.

He emphasizes that at the moment two phases of the project are indicated. Today the company is finishing the first stage. As part of this phase, the East of the LPG found a site for construction and prepared project documentation.

Within the framework of the second stage, construction of a railway trestle, construction of a tank farm, construction of a gas pipeline for transportation to the berth, construction of a complex of marine structures, as well as commissioning works are planned.

Abi Zhivs notes that at an average speed of 12 nodes per hour for a one-way transfer, the ship will need 2 days to deliver to LNG and Korea and 4 days to China.

"The terminal will be a unique technological facility for the Russian Far East and will expand the sales markets of Russian LPG producers through optimization of logistics costs and diversification of routes for gas delivery to the nearest regions of consumption - Japan, South Korea, China, Southeast Asia and other countries. The competitive price for gas consumers is due to the reduction in transportation costs for transshipment through the terminal in the city of Vladivostok, and does not depend on the price of gas from the producers, "Abi Zivs focuses on the economic feasibility of this project.


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