China National Offshore Oil Corp (CNOOC), the dominant state-owned offshore oil producer, has signed a framework agreement to build a natural gas processing terminal in Zhuhai at a cost of seven billion yuan (HK$6.5 billion). The terminal will be its third on the mainland. According to a Zhuhai government website, the agreement with the municipal government will see the terminal start processing natural gas from Panyu 30-1 and Huizhou 21-1 gas fields in the South China Sea in 2006. CNOOC is also building a gas-processing terminal in Shekou, Shenzhen, and in Fujian province. The move is in line with China's policy to diversify energy sources and promote the use of environmentally friendly natural gas. The Zhuhai terminal is designed with an annual capacity of 1.6 billion cubic metres. The gas will be sold to Zhuhai, Macau and Zhongshan. HSBC Securities analyst Gordon Kwan said the terminal would feed the soaring demand for fuel in the Pearl River delta after 2006. 'It's not a surprise to see another natural gas terminal built in Guangdong,' Mr Kwan said. 'Guangdong's economy will grow an estimated 7 per cent every year in the next five years, which means a strong demand for natural gas.' He said the Zhuhai terminal was a positive factor to CNOOC's Hong Kong-listed offshoot, which he believed would eventually buy the facility through an asset injection. The Shekou terminal is scheduled for commercial operation in 2006, while the first phase of the Fujian facility is expected to operate commercially in 2007 and the second phase in 2016.