Sinopec eyes 15 per cent stake in Petronas' Canadian LNG project

Chinese refiner in talks for 15 per cent of Pacific Northwest LNG project

PUBLISHED : Wednesday, 19 March, 2014, 1:25am
UPDATED : Wednesday, 19 March, 2014, 5:25am

Refiner Sinopec is in talks with Malaysia's Petronas to buy a 15 per cent stake in a US$20 billion Canadian liquefied natural gas (LNG) project, sources with knowledge of the matter said.

The Malaysian state oil company's Pacific Northwest LNG project, due to start-up in late 2018, is one of about a dozen proposed LNG export terminals for British Columbia's Pacific coast.

Petronas has moved quickly to leapfrog rivals in the race to export cheap Canadian gas to hungry Asian markets after securing export permits and filing environmental documents.

This month it struck a deal to sell Indian Oil Corp a 10 per cent stake, alongside existing partners Japan Petroleum Exploration and state-run PetroleumBrunei, in a move designed to share development costs.

Its deal with Indian Oil also included a 10 per cent stake in the shale gas assets that will feed the LNG plant, but sources could not confirm if Sinopec intended to follow suit.

While Indian Oil secured around 1.2 million tonnes per annum (tpa) of the project's 12 million tpa export capacity, Sinopec can expect to receive around 1.8 million tpa with a 15 per cent stake, one source said.

Chinese companies, like their Asian peers, have been scouting for oil and gas assets abroad to meet rising domestic demand.

China National Petroleum Corp last year bought a 20 per cent stake in the Novatek-led Yamal LNG project in Russia's Arctic, while PetroChina hopes to develop another Canadian LNG project called Kitimat.

It is also considering a US$40 billion investment in western Australia's Browse LNG project.

A separate industry source added that Sinopec is holding discussions with multiple project developers and is undertaking a comprehensive comparison to decide the best way forward.

Sinopec is also in talks to invest in the Kitimat project.

A Chinese delegation is expected in Canada this week to discuss energy co-operation, according to a diplomatic source in Beijing.

Separately, Sinopec is setting up a company to run its network of convenience stores across China to boost non-fuel sales at its petrol stations before a potential sale.

Sinopec, which operates the world's largest network of petrol stations, unveiled a plan last month to sell up to 30 per cent of its marketing business which includes the convenience stores, petrol stations, as well as oil-products pipelines and storage facilities.

The sale can raise US$10 billion to US$20 billion and boost the value of the low-margin marketing business, shore up the group's deteriorating finances and reinforce investment in exploration and production, analysts say.