LNG Deals Speed Terminal Projects By Lee Geng
Posted on Apr. 16, 2008
Recent deals for China to import significantly more liquefied natural gas (LNG) have sped up the government approval procedure for construction startups at as many as five receiving terminals this year.
PetroChina owns three of these terminals, and CNOOC owns two. Along with one already operating terminal and two under construction, they will allow China to import a minimum 24 million tons of LNG by 2012. Since China has also secured upstream positions in most of these deals, it faces little risk of supply disruption caused by potential geopolitical complications. Even so, these deals will be insufficient to meet China’s soaring demand for gas, meaning it will have to buy spot cargoes to meet the seasonal demand for power generation.
For 2008, in addition to the 3.7 million tons of term supply from Australia’s North West Shell Project for CNOOC’s currently operating terminal in Guangdong, China will need at least 12 spot cargoes, totaling about 750,000 metric tons. Eight cargoes will be delivered in Guangdong Province, and four for a new terminal in Fujian Province. The first terminal approved for construction this year is in the northeastern city of Dalian, with a planned yearly capacity of 3 million metric tons, due to start operations in 2012. Approval followed the reported signing of an agreement for long-term supplies between PetroChina, Dalian’s owner and operator, with Qatargas Operating Co.
In addition to the agreement with Qatargas, last September PetroChina signed a term agreement with Australia’s Woodside Petroleum for 2 million to 3 million tons of LNG a year from the Browse gas field, over 15 to 20 years. Days earlier, PetroChina had signed a deal for 1 million tons of LNG from Royal Dutch Shell’s share of planned production from the offshore Australia Gorgon project.
The Australia deals have prompted the government to approve another PetroChina LNG terminal for construction in the city of Rudong in Jiangsu Province. A PetroChina official said the company is evaluating a major gas deal in Indonesia that could allow Indonesian gas to begin arriving in China sometime after 2012.
PetroChina’s third proposed terminal will be located in the northern city of Tangshan. However, the project’s startup is linked to the sales agreement with Iran, from which PetroChina expects to import at least 3.5 million tons of the fuel from French company TOTAL.
In addition to the new terminals, PetroChina also plans to build four more in the provinces of Guangdong, Zhejiang, and Shandong and in the Guangxi region, to receive imported LNG during the peak demand season to supplement the pipeline gas.
The most ambitious and controversial deal is the imminent agreement between CNOOC and Iran for the former to import 10 million tons of LNG per year from the North Pars gas project. CNOOC will invest $16 billion in the upstream development and in building downstream facilities to turn gas into LNG in Iran. CNOOC has not identified any particular terminals for the Iranian LNG, but sources said it will likely go to two, in the city of Ningbo in Zhejiang Province and the city of Zhuhai in Guangdong Province. The two projects are expected to receive government approval this year.
This month, CNOOC plans to begin operations at its second terminal, located in the city of Quanzhou in Fujian Province, with four spot cargoes. This will be before the arrival of term cargoes in early 2009 from Indonesia’s Tangguh project, scheduled for 25 years at 2.6 million tons a year. CNOOC is currently building its third terminal in Shanghai with imports expected to arrive from Malaysia; the first cargo is slated to arrive in 2009 at 1.1 million tons a year, expandable to 3 million tons by 2012.
The company’s (and China’s) first terminal started in 2006 at the city of Shenzhen’s Dapeng Bay in Guangdong Province, with LNG coming from Australia.
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