Regional LNG: China's LNG projects delayed amid increasing costs: Report

China's ambitious liquefied natural gas (LNG) project construction plan will be delayed due to increasing LNG import prices, domestic experts warned as quoted by Interfax.

"Given the present high LNG price, it is hard to finalize LNG import contracts with foreign LNG producers within the next one or two years," Li Jianhua, a LNG expert with Guangdong Provincial Energy Research Institute told Interfax on Thursday.

Li expected the LNG price would not drop significantly in the short term, in line with the global crude price hike.

The increasing cost will no doubt delay the country's pace on LNG projects, said Li.

To meet increasing domestic energy demand, China has encouraged large-scale LNG import projects. However it has changed its attitude and ordered only "appropriate" development for LNG projects late last year, as the LNG price increased.

CNOOC, the leading LNG project builder in the country, has initiated four LNG projects on the southeastern coast, in Guangdong, Fujian, Zhejiang and Shanghai.

The Shanghai project, which is scheduled to become operational by 2008, is still struggling to locate LNG sources.

"We are still in talks with the main LNG producers," Liu Junshan, the spokesman for CNOOC, told Interfax. Liu however declined to reveal more information.

According to Li, such types of projects usually need around three-years' construction time, which means the Shanghai project will definitely be delayed.

The Shanghai Project, with co-investment from CNOOC and the local Shenergy Corporation totaling RMB 4.59 billion ($566 million), is designed to receive 3 million tonnes of LNG in the first phase and 6 million tonnes in the second phase. The two companies established the project company Shanghai LNG Corporation in the second half of 2004.

The Guangdong LNG project, located in Dapeng Bay in Shenzhen, which has secured it first phase LNG supply, is also vying for LNG sources for the second and third phase, a local official told Interfax last month.

"The [LNG] price [for the second and third phase] could never be that low as it was for the first phase, which will be probably settled at around $4.5 per million Btu, while the spot price for LNG stands at more than $6 per million Btu," Li predicted.

The Guangdong terminal, the country's first LNG import project, is expected to receive the first tank of LNG from Australia on April 28.(*)