China's dominant offshore crude oil and natural gas producer CNOOC plans to build two more liquefied natural gas (LNG) terminals. The projects are part of its strategy to tap offshore gas and distribute it to the populous, prosperous east-coast provinces. Beijing aims to boost consumption of cleaner, more environmentally friendly energy sources. At the same time it wants to reduce reliance on coal, which accounts for 70 per cent of existing consumption. The Hong Kong-listed flagship of China National Offshore Oil Corp is in talks with the governments in the provinces of Fujian and Shandong on the feasibility of building LNG terminals, Reuters reported citing an unnamed industry source. 'CNOOC and local authorities of Fujian and Shandong have been in discussions for a while. Some letters of intent are expected to be signed,' said a source who gave no time frame. CNOOC chairman Wei Liucheng said yesterday that the proposed Fujian terminal would have the capacity to re-gasify between three and five million tonnes of imported LNG, and would cost about US$1 billion in investment, infocastfn.com reported. CNOOC plans to build distribution networks to feed gas into households in China's eastern and southern coastal provinces, to complement the planned LNG terminal projects. It has recently struck a deal to form a joint venture with the Zhejiang provincial government to build a distribution network, and is in talks with the Shandong and Fujian provincial governments on similar deals. Analysts said feasibility studies and implementation of the proposed projects in Fujian and Shandong would take many years to complete, and were not likely to go ahead until a Guangdong pilot project proved commercially viable. They also said that according to a State Development and Planning Commission policy statement for 2001-05, Beijing would give priority to the west-east pipeline and the Guangdong LNG project. 'While they may sign letters of intent for LNG projects in additional provinces, ultimately their progress will largely depend on demand, pricing and profitability,' an energy analyst at a United States brokerage said. 'These issues are evolving and they take a long time to sort out by the many parties involved.' The planned Guangdong LNG terminal in Shenzhen, estimated to cost US$600 million, will come on stream in 2005, about the same time as the planned 120-billion yuan (about HK$112.47 billion) 4,200 kilometre west-east pipeline project led by PetroChina, which will transport gas from western China to Shanghai. The Shenzhen terminal is expected to have a re-gasification capacity of three million tonnes of imported LNG a year. The first-phase development also involves 300km of associated gas pipelines built to supply the booming Guangdong region. British-based oil giant BP Amoco will have a 30 per cent stake in the terminal.