Regional LNG: China's Guangdong in talks on new terminal with major LNG producers: Report

Southern coastal Guangdong Province is currently in talks with major international liquefied natural gas (LNG) producers in order to sort out the supply sources for its ambitious LNG terminal project, which will be the country's first.

Russian LNG producers are particularly welcomed by the Guangdong side, given to its abundant gas resources, Liang Chengyu, the president of the Guangdong Provincial Chamber of Oil and Natural Gas, told Interfax on Friday.

"We have launched talks with all major LNG producers worldwide, but we have special expectations about Russian companies, since the country is rich in gas resources and has a strong reserve system," said Liang.

Liang said that apart from LNG resources, normal natural gas is also welcomed. "Natural gas can be easily be delivered to Guangdong through pipelines," said Liang, who mentioned the Sino-Kazakhstan pipeline, which can also be used to import Russian natural gas.

In addition, the country is planning a second West-East Pipeline (WEP) from Xinjiang. The second WEP route is now expected to end in Guangdong instead of Shanghai, Jiang Huaxiong, the project manager of the Xinjiang section of the WEP, told Interfax late in December.

The pipe, with an annual natural gas supply capacity of 26 bln cu m, more than double the first one, will obviously help Guangdong increase its consumption of natural gas, aid Jiang, and it is expected to be launched in 2007.

According to Liang Chengyu, the LNG price will be the main factor in the negotiations.

Liang also revealed the scale of the second phase of the province's LNG terminal project.

"We plan to import 10 mln tons of LNG in the second phase of the project, to supply LNG to six more cities," said he said.

The Guangdong LNG project is located in the Dapeng Bay in Shenzhen, and CNOOC, the main constructor, has sealed an agreement with Australia's Gorgon to import 3.3 mln tons of LNG a year for 25 years.

The first phase will provide 1.3 mln tons of Australian LNG a year to four cities, Guangzhou, Shenzhen, Foshan and Dongguan, and increase power generation capacity by 4.2 mln kW, amounting to nearly 10% of the local power supply.

Guangdong is expected to receive the first shipment of LNG from Australia on April 28, according to Liang.

One of the country's most developed regions, Guangdong does not itself have the energy resources to sustain its growth, and will mainly rely on nuclear power and gas resources, said Liang.

"As to the proportion of total energy consumption [met by natural gas], we will decide according to the cost," said Liang.

The province has faced increasing energy supply problems in recent years, amid rapid industrial development. It was the worst to suffer from a nationwide oil product shortage through July and August, and liquefied petroleum gas (LPG) has also been in short supply in the last few weeks.

"Guangdong imported 4.2 mln tons of LPG in 2005, amounting to 72% of the country's total," said Liang. (*)