China to build second LNG facility in Fujian

China plans to build a second liquefied natural gas import terminal, paving the way for resource-rich countries such as Australia and Indonesia to sell more gas to the world's No. 2 energy consumer, Bloomberg reported Saturday

The new plant will be in southern Fujian province, Zhang Guobao, vice chairman of the State Development Planning Commission, said in an interview. China hasn't decided whether CNOOC Ltd., PetroChina Co. or China Petroleum & Chemical Corp. will build the project, Zhang said.

The decision puts to rest speculation that an LNG plant would be built in Shanghai, China's biggest commercial center, which will instead be served by a 4,000 kilometer (2,500 mile) cross-country pipeline. Construction will begin within five years on the new plant, which will be smaller than a 3-million-ton-a- year Guangdong facility set to open in 2006.

``We think Fujian will need a LNG import plant to meet its energy needs,'' Zhang said. ``We don't plan to build an LNG import facility in Shanghai because the area will get its gas supply from the West-East pipeline and the East China Sea.''

China wants to quadruple use of cleaner-burning gas to 8 percent of its energy mix by 2010, reducing its dependence on coal, which accounts for 66 percent of energy use. While China has rich gas reserves, most are too removed from key markets such as Fujian, Guangdong and Hainan Island to compete with cheaper imports.

Australia, Indonesia, Russia, Brunei and Qatar are competing to sell natural gas to China as demand growth slows in Japan and South Korea, among Asia's largest consumers. Exxon Mobil Corp., Royal Dutch/Shell Group and BP Plc, the world's top publicly listed oil companies, have stakes in some of the largest Asian and Middle Eastern fields.

Central to Beijing's push to boost gas use is the 46 billion yuan ($5.6 billion) pipeline to bring fuel to Shanghai and other coastal cities from northwestern Xinjiang province. CNOOC also wants to sell gas pumped from offshore gas fields 450 kilometers southeast of Shanghai to the same markets.

CNOOC's parent, China National Offshore Oil Corp. is building the nation's first LNG facility with BP, which has a 30 percent stake in the $850 million project. It agreed with the Fujian provincial government last October to begin a feasibility study for an LNG terminal and power plants.

Australia, Indonesia and Qatar have been shortlisted to ship LNG to the terminal, located in Shenzhen, across the border from Hong Kong. Analysts say the contract to sell 3 million tons of LNG a year may be worth more than $500 million. (*)