Regional LNG: CNOOC, Shenergy sign framework on LNG terminal in Shanghai

The mainland's top offshore oil producer China National Offshore Oil Corp (CNOOC) has signed a framework agreement with Shanghai-based power generator Shenergy Group to build a new liquefied natural gas (LNG) terminal in Shanghai, a company official said.

"We've initially agreed to build a 4.6 billion yuan (US$ = 8.3 yuan) LNG terminal on an island near Shanghai," CNOOC official Liu Junshang told AFX-Asia.

"The first phase will start operation in 2008, with designed annual capacity of 3 million tons," Liu said.

Previous media reports had singled out BP Plc as CNOOC's likely partner. BP had contributed to CNOOC's two earlier LNG projects, and BP company executives had more than once expressed interest publicly in participating the new Shanghai terminal.

The new deal, scheduled to be officially signed next month, will be CNOOC's fourth LNG operation in the country, which has started turning to cleaner energy such as liquefied natural gas to sustain its growing economy.

CNOOC teamed up with a local gas firm in the eastern province of Fujian to build its first LNG terminal in Aug 2002. The initial phase of the project, costing 24 billion yuan, is scheduled to start operation in the first half of 2007, with annual capacity of 2.5 million tons.

BP's 37.2 percent-owned Tangguh LNG gas field in Indonesia will supply LNG to the Fujian terminal for at least 25 years.

CNOOC built a second LNG terminal in southern Guangdong province in Oct 2002, providing an annual capacity of 3.7 million tons for the first phase and 6.2 million tons for the second. BP Plc unit BP Global Investments owns a 30 percent interest in the project.

CNOOC also signed a new 14.2 billion yuan LNG contract with eastern Zhejiang province in March this year, with designed annual capacity of around 3 million tons.

The company then also inked a framework agreement to supply LNG to the northern municipality of Tianjin, and is lobbying governments in northeastern Liaoning province and eastern Jiangsu province for new contracts.

CNOOC's rival, China Petroleum & Chemical Corp (Sinopec), has also joined the foray. The mainland's top oil refiner, earlier in the year, won a 4.5 billion yuan LNG deal in eastern Shandong province. (*)