Regional LNG: China's 3rd LNG terminal to cost$ 1.7 billion

CNOOC, which sealed a deal with eastern Zhejiang province to build China's third LNG terminal, is confident of winning Beijing's approval and complete the project around 2008, a company official was quoted by Reuters as saying on Thursday.

Under the deal signed with the local Zhejiang government overnight, CNOOC group, parent of Hong Kong and New York-listed CNOOC Ltd, will build a three million tonne-per-year terminal and a 2,800-megawatt power plant in the port city of Ningbo for around $1.7 billion.

CNOOC, PetroChina and Sinopec Corp are jostling to build terminals on China's eastern seaboard to import the super-cooled, compressed natural gas to feed the world's second-biggest power market.

"We have better communications with the government and have made solid preparations in terms of gas buyers," said the official who is involved in project.

CNOOC is expected to take a 51 percent interest in the Zhejiang project, which includes a re-gasification terminal, a gas trunk line and a gas-fired power plant, the firm said in a statement.

Chinese industry officials said the deal would consolidate CNOOC's leading role in China's burgeoning liquefied natural gas sector.

Number two oil giant Sinopec Corp has proposed to Beijing to build a terminal in Shandong province and China's largest oil firm, PetroChina is seeking investment opportunities in Jiangsu, Shanghai and Zhejiang.

The CNOOC official said the firm would tender for gas supplies for the Zhejiang terminal and might not necessarily source from the huge Gorgon field, off northwest Australia, where it already has a framework gas purchase deal worth about $21 billion.

However, analysts said CNOOC might again try to catch a bargain for a stake in overseas gas assets by securing gas supplies for the Zhejiang terminal.

One Hong Kong-based analyst with a Western investment bank said the Gorgon gas project, led by ChevronTexaco Corp , could still be high on the list of potential suppliers.

"Gorgon is at a more advanced stage. You have a reason to sign such a deal," said the analyst, who requested anonymity.

"Ideally that's perfect, three gas fields for three terminals. (Australia) Northwest Shelf for Guangdong, Indonesia's Tangguh for Fujian and Gorgon for the new one," he said.

CNOOC is the majority stake holder in China's first two LNG terminals in southern Guangdong province and southeastern Fujian province.

It inked a framework pact last October to take up to 100 million tonnes of LNG from the Gorgon project over 25 years. As part of the package, CNOOC expected to get a 12.5 percent stake in the project for about $275 million.

Analysts said cash-rich CNOOC would have no problem financing the project, holding a war chest of more than $2 billion. The company can also borrow from Chinese banks who are keen to lend.

The CNOOC official said one major gas taker from the Zhejiang terminal would be the giant 2,800-MW power plant, comprising eight 350-MW generators.

"Zhejiang has shown stellar economic growth in recent years. The proposed project is designed to fuel the continuous growth expected and to meet the resulting energy demand in the area," said CNOOC President Fu Chengyu.(*)