Regional LNG: PetroChina, Sinopec to copy CNOOC in gas race: Report

China's top two national oil firms, under pressure to grow abroad, aim to grab a share in gas fields of producers who are jostling to supply LNG to the world's second-biggest power market, Reuter quoted oil officials and analysts as saying on Friday.

Cash-rich PetroChina and Sinopec, keen to carve a spot in China's fledgling LNG sector now dominated by CNOOC, have the bargaining power to get a stake in overseas projects as producers are eager to woo investors and secure large markets for the gas.

Sinopec Corp has proposed to Beijing to build a liquefied natural gas terminal in the province of Shandong. PetroChina is expected to put forward plans soon for an import terminal in Shanghai or the provinces of Zhejiang and Jiangsu. The sites are all on the eastern seaboard.

Sinopec's war chest for overseas investments amounted to $2.6 billion and PetroChina had $2.3 billion by mid-2003.

The lead party in China's first two LNG terminals, CNOOC has blazed the trail by taking stakes in gas fields in Australia and Indonesia as a condition for committing to long-term supply deals from the projects.

"They are likely to copy the CNOOC model. It gives them a domestic gas growth story, but also gives what they really want -- equity overseas," said Gavin Thompson, China country manager for upstream consultancy Wood Mackenzie, now advising Chinese oil firms on overseas expansion.

CNOOC is the major stakeholder in China's first two LNG projects in the provinces of Guangdong and Fujian, which will have a combined annual capacity of 6.3 million tonnes and are slated for operation in 2006 and 2008, respectively.

Listed unit CNOOC Ltd, acquired in 2002 a 5.56 percent stake in Australia's Northwest Shelf joint venture, after the project won a A$25 billion ($19.2 billion) contract to supply Guangdong.

It was expected to get a 12.5 percent stake this year for about $275 million in Australia's huge Gorgon gas project, which has proven reserves of 365 billion cubic metres (bcm), after Australia won a second supply deal from China worth $21 billion.

CNOOC Ltd also took a 12.5 percent stake for $270 million in Indonesia's massive Tangguh field, after China agreed to buy gas from the world's biggest LNG exporter to feed Fujian terminal.

Analysts said Sinopec and PetroChina were likely to acquire overseas assets of at least the same size as those taken by CNOOC. And both could easily raise funds in the bond market, thanks to solid financial standing and strong government support.

IRAN, SAKHALIN?

Chinese state oil firms are under pressure to secure foreign oil and gas assets to fuel the world's fastest-growing major economy as domestic oil and gas output declines.

Surging economic growth of more than nine percent last year fuelled a 15 percent jump in power demand and triggered brownouts in more than half of the country's 31 provinces last summer.

Chinese firms have spent about $4 billion in Indonesia, Australia, Kazakhstan, Sudan and South America.

On Thursday, state trader Sinochem Corp, which was eyeing Thai refining assets last year, said it was looking to buy South Korea's smallest refiner, Inchon Oil Refinery Co Ltd.

To feed the proposed LNG projects, China could be targeting Indonesia, Australia, Malaysia, Oman and Qatar, all of which bid for gas supply deals for China's first LNG terminal.

Analysts also pointed to exporters such as Iran and Russia.

Iran, which has the world's second-largest gas reserves after Russia, has said it sought to export gas to China. Russia's 9.6-million-tonne-per-year Sakhalin-2 LNG project also stood out due to proximity to China's east and north coast, analysts said. (*)