Regional LNG: CNOOC, Shenergy team up for Shanghai LNG project

State-owned China National Offshore Oil Corp (CNOOC), the country's top offshore oil producer, said it has teamed up with power generator Shenergy Group to undertake a 4.59 bln yuan liquefied natural gas (LNG) project in Shanghai, Xinhua reported Thursday.

CNOOC and Shenergy have formed a 45-55 joint venture to build LNG facilities in the city's suburbs, including a terminal with an annual capacity of six mln tons and two 160,000 cubic meter storage tanks, CNOOC said in a statement. Around 30 pct of funds will come from the partners' internal resources with the remaining 70 pct from bank credit or other channels, it said. The the new project, scheduled to start operation in the first half of 2008, is another major advance for the offshore oil giant in the lucrative LNG sector.

It had earlier secured several LNG deals in wealthy provinces, including Guangdong in the south, Zhejiang and Fujian provinces in the east and is lobbying governments in northeastern Liaoning and eastern Jiangsu provinces for new contracts.

Meanwhile, its state-controlled rivals - top oil producer China National Petroleum Corp (CNPC) and top refiner China Petroleum & Chemical Corp's (Sinopec), have also joined the fray. CNPC has signed a initial agreement to build an LNG terminal in the southwestern Guangxi region, while Sinopec has landed a contract in the eastern province of Shandong. CNPC is also the owner and operator of a 4,000-km pipeline, which carries 12 bln cubic meters of natural gas per year from the Tarim Basin in the northwest to the energy-hungry eastern regions.

Industry analysts expect rivalry among the trio for the lucrative LNG business to heat up further, as demand for the clean energy will continue to rise on a booming economy. Shenergy Group, parent of Shanghai traded power generator Shenergy Co Ltd , has made major investments in power and natural gas projects, with assets totaling 24.17 bln yuan as of end-2003.(*)