Regional LNG: Taiwan's CPC mulls building vessels to ship LNG from Qatar

Taiwan's Chinese Petroleum Corp is interested in commissioning the construction of four new vessels for the future transportation of liquefied natural gas imports from Qatar for power generation, a company official said Friday as reported by Platts of Hong Kong.

"The proposal has not been raised to the company's board for approval. We still have to carry out studies on issues such as operation of a fleet, proposed investment of the construction and design, etc.," the official said.

Construction of an LNG tanker normally takes about one-and-a-half to two years. CPC in early July won a 25-year contract supplying national utility Taiwan Power 1.68 million tons per annum (MTPA) of LNG for the latter's new 4,272 MW Tatan power plant in northern Tatan starting 2011. Bearing the timetable in mind, CPC is hoping the new tankers would be ready by 2010. Company officials have estimated the whole LNG tankers development and construction project to take six years to complete.

Qatar's Ras Laffan Liquefied Natural Gas Co Ltd has indicated interest in teaming up with CPC on the development and operation of the four new LNG tankers, the CPC official said. CPC has committed to lifting 3 MTPA of LNG from the RasGas II starting 2011 to supply Taipower's Tatan requirements. In return, CPC is aiming at taking a 5 percent interest in RasGas.

CPC has a term LNG supply contract with Indonesia, and the supplier is responsible for shipping the cargoes to Taiwan. The Indonesian LNG cargoes are priced on an ex-ship basis at berth in Taiwan. CPC also holds a 40 percent stake in a joint venture with an Indonesian company, which owns and operates an LNG tanker "Golar Macu," which ships LNG imports from Indonesia. Development cost of the tanker "Golar Macu" was $240-mil, the official said. CPC's experience in the JV has prompted the company to look into the possibility of pricing future Qatari imports on a FOB basis and building its own LNG fleet to move the cargoes.

"An LNG tanker has a life span of 40 years. If we can price our (Qatari) cargoes on an FOB basis, then we might be able to improve our profit margins" in reselling the gas to Taipower, the CPC official said.

As CPC's term LNG commitments with RasGas exceed the amount required by the Tatan power project by 1.32 MTPA of LNG, this gives CPC a bargaining stake in contract renewal negotiations for Indonesia's Bontang LNG supplies before its current term expires in 2010.

RasGas's shareholders are Qatar Petroleum (63 percent), ExxonMobil (25 percent), Itochu (4 percent), LNG Japan (3 percent) and South Korea's Kogas (5 percent). CPC will have a decision by the end of the month on whether to build a new terminal in the Taichung port for processing the Qatari LNG cargoes or acquiring a terminal project currently under development by a private consortium in Kuantang near to the Tatan power plant site. (*)