China National Offshore and Oil Corp plans to build a liquefied natural gas (LNG) terminal in the Yangtze River delta to import gas from an Australian gas field its listed unit, CNOOC, is negotiating to buy into. The project will form another piece in China National's ambitious plan to build a pipeline network covering the entire mainland coastline. It is expected to compete head-to-head with PetroChina's west-east pipeline project, which also targets the prosperous coastal provinces of Zhejiang, Jiangsu and the city of Shanghai, as well as the inland provinces of Anhui, Henan and Shanxi. Red chip CNOOC, China's dominant oil producer, aims to close a deal this year to buy a 12.5 per cent stake in Western Australia's offshore Gorgon gas project, chief financial officer Mark Qiu Zilei said. A letter of intent was signed in October. Gas production is targeted to start between 2008 and 2010, and China National plans to build a terminal to receive and regasify liquefied gas shipped from Gorgon. The terminal eventually will be linked by a trunk pipeline with China National's terminals under construction in Guangdong and Fujian, as part of the company's long-term plan to build a pipeline network stretching from Guangxi in the southwest to Heilongjiang in the northeast. Mr Qiu said it had not been decided whether China National would join with a partner to build the terminal, but added that a partnership was looking more likely. 'Gas projects are different from oil projects in that the former is market-driven while the latter is supply-driven,' he said. 'For oil, you don't have to worry about the selling part and you can't control the price, but for gas, you need to find the customers.' He would not divulge the site of the proposed terminal, but said Shanghai and the provinces of Jiangsu and Zhejiang were possible locations. Despite admitting gas demand needed to be induced, he played down concerns there may not be sufficient demand for both the terminal and the west-to-east pipeline to be viable. 'If the 10 million population of Shanghai all use gas, it will consume a third of the west-to-east pipeline's capacity,' he said. While gas is environmentally friendly it is more expensive than coal. Suppliers need government support to compete with coal producers through administrative measures that limit coal use or provide tax breaks for gas projects. PetroChina's Beijing spokesman said the company had signed 'take-or-pay' contracts with 20 customers, which have committed to buy 7.4 billion cubic metres (bcm) of gas a year by 2007, accounting for 62 per cent of the pipeline's designed capacity of 12 bcm. Industrial users, mainly power plants and chemical makers, accounted for about 70 per cent of the committed volume, while residential gas distributors took up the rest. China hopes to raise the weighting of gas in its energy consumption mix from 3 per cent last year to 6 per cent by 2010.
