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Sept. 27 (NBD) -- IDG Energy Investment Limited (IDG Energy, 00650. HK) announced Tuesday that the company, through one of its wholly-owned subsidiaries, has entered into an agreement with Foxconn subsidiary JUSDA Supply Chain Management International Co., Ltd. (JUSDA Supply Chain) and its management team to form a joint venture called Shanghai JUSDA Energy Co., Ltd. (JUSDA Energy) to provide liquefied natural gas (LNG) logistics solutions.  

Under the agreement, the involved parties will invest up to 500 million yuan (72.8 million U.S. dollars) in the joint venture, to which IDG Energy, JUSDA Supply Chain and its management team will contribute 39 percent, 51 percent and 10 percent, respectively.

JUSDA Energy's first batch of LNG ISO tank containers has departed from Vancouver, Canada and will arrive in Shanghai in early October. The first and second test batches will transport a total of 16 containers to China with each weighing 17.5 tons.

Liu Zhihai, CEO of IDG Energy, told NBD that the distribution price of LNG is around 4,000-4,500 yuan (582.7-655.6 U.S. dollars) per ton in eastern China this year. Transporting LNG from abroad to China could produce lucrative profits, Liu said, without revealing the specific costs.  

The tie-up between IDG Energy and JUSDA Supply Chain will help China source natural gas supply globally to meet rapidly growing need. 

Traditional LNG imports require large LNG receiving terminals, which can't be built without great port resources. Currently, China's LNG receiving terminals are mainly in the hands of the three top petroleum enterprises. LNG tank containers can serve as a great supplement to the traditional way of LNG imports, explained Liu.

In addition to importing LNG, IDG Energy eyes the LNG distribution market. It is noted that 21.3 million tons of LNG were distributed in China in 2017 and the number will continue to grow in the future. Using ISO tank containers to transport LNG is more secure, efficiently and cost-effectively than using common tank cars, Liu said. 

Liu told NBD that IDG Energy is currently designing logistics solutions for a LNG trading company. However, he didn't give further details.

With the first batch of LNG ISO tank containers arriving, IDG Energy will be one step closer to build itself into a LNG logistics provider. However, the new business model is still at its infancy and there are many difficulties to overcome.

According to Liu, there are three major obstacles. First, transportation standards at home and abroad are different. Second, LNG belongs to explosive chemicals, which means it has to be transported by qualified transportation companies. Moreover, the facilities and willingness of ports to receive LNG tank containers represent a challenge.

However, many large ports have agreed to receive LNG tank containers, Liu added.  

Email: tanyuhan@nbd.com.cn