The Development of China’s Auto LPG Industry
By Lily Zhang, LPG International Market Analyst, C1 ENERGY Limited
China has been promoting autogas consumption for a few years now. China’s LP Gas consumption reached 22.16-mil mt in 2009. About 846,400mt of LP Gas was used to fuel automobiles and this was approximately 4% of China’s overall LP Gas consumption. Autogas consumption in 2009 was twice more than five years ago, owing to the interest that some regional governments have been putting into its development.
China's autogas consumption from 2000-2010
China's LPG consumption per sector
Development History of China’s Autogas industryChina started enhancing the promotion of autogas in the early 2000s.The annual growth rate of autogas consumption averaged 16.07% in 2005-2009, in contrast to the marginal growth rate of total LP Gas consumption during the time period. The highest rate appeared in 2005. Back in that time, LP Gas won the favor of several local governments, but it soon lost color because of competition from alternative CNG.
In 2007, little price gap was seen between LP Gas, gasoline and gasoil, therefore the development of autogas halted to a standstill. It was not until 2008 that autogas came back to an upward track – skyrocketing!
China's GDP and autogas consumption
Four Major Cities Promoting Autogas
In 2001, autogas was introduced to more Chinese cities and nine were picked up as trial fields for autogas use in cars. These nine cities were Beijing, Shanghai, Chongqing, Haikou, Xi’an, Harbin, Urumqi, Shenzhen and Mianyang.
Autogas spread into 11 more big cities in 2008. The number of cities promoting autogas was altogether 25 by the end of 2009. Nowadays autogas is the major alternative fuel for buses, taxies and private cars as well in four main cities: Guangzhou, Shanghai, Wuhan and Shenyang. Guangzhou city in South China’s Guangdong province is considered to be the beneficiary of government’s pro-LP Gas policy. After Guangzhou provincial government approved the use of autogas, attention has since been paid to construct LP Gas stations and establish autogas-fueled public transport systems. Until now, there have been 160,000 autogas fueled buses and 8,000 autogas-fuelled taxies in service in the city.
The development of autogas in Shanghai has never been easy. When autogas was first introduced - it was expensive to get engines refitted to use it, and there were very few autogas filling stations. However, there was a huge population relying on motorcycles, around 260,000 autogas-powered motorcycles travel around the city; and autogas consumption has been on the rise in the past several years.
Wuhan, unlike Shanghai and Guangzhou, is a city dependent on both natural gas and autogas in public transportation. Autogas-powered autos make up 19.2% of the numbers of buses and taxies. The number of buses consuming autogas in the city is 1,344, and that of autogas-fueled buses is 117,000.
Shenyang is growing up in autogas consumption, ever since its progress has been made in promoting autogas use by 160,000 of cabs and 2,500 buses. Shenyang is the capital city of Liaoning province.
Autogas consumption by city in China.
Autogas is commonly seen to power buses and taxies, but its market share in private cars is limited, as we could see the difference in the following.
Autogas consumption by vehicle in Guangzhou
Sources of Autogas in China
Domestic autogas production could only cover 24.23% of China’s autogas consumption in 2009, so China had to import around 75.77% of autogas to feed domestic automobiles. The high dependency on foreign resources is due to unstable quality of domestic resources.
Domestic autogas supply mainly comes from major refineries like Guangzhou Petrochemical and Wuhan Petrochemical. The domestic supply was 205,000mt in 2009. The amount of imported LP Gas for fueling automobiles in China touched 641,000mt in the same year.
Different sources of autogas in China.
Strengths of Autogas in China
LP Gas substitution for other auto fuels didn’t become successful overnight. Autogas was used by buses and taxies thanks to the initiatives regional governments had taken. And then LP Gas as a fuel was gradually accepted by more city drivers, because of the following:
Firstly, autogas is a clean replacement for traditional automobile fuels like gasoline and gasoil. It burns more cleanly and is non-toxic, non-corrosive and it is free of tetra-ethyl lead. The government’s pro-autogas policy is a major step toward reducing carbon emissions, a major cause for environmental degradation.
Secondly, autogas is much cheaper than gasoline and gasoil. The Chinese government imposes no consumption tax on autogas but consumption tax is levied on gasoline and gasoil. As a result autogas is used by taxi drivers and bus companies.
More Efforts Needed in the Future
According to experts, autogas consumption in the future is unlikely to expand with leaps and bounds. Total autogas consumption in 2010 is projected to be less than 870,000mt.
A lot of cities encounter difficulties in promoting autogas consumption. The majority of Chinese private car owners haven’t been fully aware of the reasons to choose autogas. Unfortunately, in their opinion, it is unsafe - a misconception out there because of the illegal and unqualified autogas mixtures available on the market.
Moreover, autogas prices are volatile. China’s autogas production capacity is much limited. Chinese drivers, therefore, have to buy imported autogas to meet their daily demand. However, international autogas prices are hinging on market fundamentals like supply and demand, crude oil prices and so on.
What is worse, the tense competition between LP Gas and natural gas leaving the latter little room to be promoted as a transportation fuel. Natural gas is said to be much cleaner and more economical. Chinese government is in favor of natural gas as an auto fuel. Autogas is only the secondary choice.
The future development of autogas wouldn’t be any better without the efforts into:
A. Maintaining fair competition between LP Gas and natural gas. The government should attach equal importance to development of autogas and also be considerate when promoting LP Gas or natural gas as auto fuel in a specified city. For example, autogas in cities like Shenyang is preferable, while natural gas is more suitable in Mianyang of Southwestern China, because LP Gas production is plenty in the former while natural gas is rich in the latter.
B. Strict supervision over LP Gas sources. Government bodies should be responsible for ensuring the quality of autogas on the market. Refineries have to make sure that their LP Gas products must be qualified. Importers should also guarantee their LP Gas imports to meet the national standard. Gas stations selling unqualified LP Gas should be fined or even shut down.
C. Stabilizing autogas supply;China should encourage domestic refineries to produce autogas, so that it can reduce its dependence on imported resources. Also, stable import channels must be secured. More autogas filling stations should also be set up for the conveniences of autogas fueled automobiles.
For information on the autogas market in China, please don't hesitate to contact Lily Zhang on the following email: firstname.lastname@example.org