Regional LNG: CNOOC set to increase LNG terminals capacity

China?s dominant offshore oil producer, China National Offshore Oil Corp, says it plans to speed up approved liquefied natural gas projects on the mainland, but subsequent projects will take longer to develop, Hong Kong-based The Standard daily reported Tuesday.

The company, which is leading the country's LNG development efforts, plans to expand the capacity of the Guangdong LNG terminal, its first, to 10 million tons a year from the current 3.8 million.

The first phase of the project will begin operations in the first half of 2006 and the second phase could start as early as 18 months later, said CNOOC chairman and chief executive Fu Chengyu. The project is contracted to buy 3.7 million tons per year of gas from Australia's Northwest Shelf.

Fu said the higher-than-expected demand for gas in Guangdong was largely due to the narrowing of the gap between coal and gas prices.

Senior vice president Cao Yunshi told The Standard that the company is focused on four terminal projects in Guangdong, Fujian, Zhejiang and Shanghai that the central government has already approved.

Other proposed projects in less mature markets could take longer to develop, Cao said.

The company previously proposed to build eight to 10 LNG terminals along China's eastern coast. However, its planned purchase for about US$275 million of a 12.5 percent stake in Australia's Gorgon project faces stumbling blocks due to disagreements with partners over pricing and equity shares, Cao said. Gorgon gas was earlier designated to supply the Zhejiang LNG terminal.

?CNOOC may have to pay a higher price for the project compared to a year ago if there is a change in the partnership terms,'' said Michael Lee, an analyst with UOB Kay Hian.

The company told analysts it would increase the capacity of the Guangdong and Fujian LNG terminals by 15 percent. The Guangdong terminal will buy gas from Australia's Northwest Shelf and the Fujian terminal will buy from Indonesia's Tangguh project. (*)