ExxonMobil inks supply deal with Zhejiang Energy for 1m tons of LNG

US-based ExxonMobil Corp announced a sales and purchase agreement with Zhejiang Provincial Energy Group for liquefied natural gas supply on Monday, under which Zhejiang Energy is expected to receive 1 million metric tons of LNG annually over 20 years.

"This sales and purchase agreement represents an important milestone and provides a solid foundation for our strategic partnership with Zhejiang Provincial Energy Group and ExxonMobil shares Zhejiang Energy's vision in developing a major LNG gateway in the Ningbo-Zhoushan region," said Peter Clarke, senior vice-president of LNG at ExxonMobil.

"We look forward to continuing our support for Zhejiang Energy during the construction, commissioning and operation of its Wenzhou LNG receiving terminal."

This is also part of Zhejiang province's efforts to further expand its LNG terminal receiving capacity, cooperating with foreign oil and gas companies, to help quench the nation's growing thirst for clean fuel amid green push.

China imported more than 53 million tons of LNG last year, reaching a new historic high by accounting for 60 percent of total natural gas imports, Zhang Jianhua, head of the National Energy Administration, said earlier. The country has also been stepping up construction of its LNG infrastructure facilities in recent years.

Analyst said terminals, being a core infrastructure of the LNG import trade, have attracted many private companies in recent years amid China's rising demand for the cleaner fuel.

Li Li, research director at energy consulting company ICIS, said that the LNG terminal sector will be more open in the province and nationwide for both private and foreign players as oil and gas infrastructure and pipelines are undergoing reform.

The chances are high that there will be more privately owned and operated LNG import terminals, in addition to the current LNG receiving terminals for imports, mostly dominated by the State-owned companies including China National Offshore Oil Corp, China Petroleum and Chemical Corp and China National Petroleum Corp, she said.

Domestic private enterprise ENN is already looking for other opportunities in other coastal areas in addition to the Zhoushan receiving terminal.

She said that of all the LNG terminals in Zhejiang province, the Zhoushan terminal, backed by the Yangtze River Delta market, along with its sea route and access to inland provinces, will play a significant role in China's LNG receiving capacity, and more private and foreign companies will be gearing up to meet that growth.

The region is expected to leverage its location advantage to further expand its transaction volume, she said.

Compared with other terminals throughout the country, mostly dominated by the country's State-owned oil and gas majors, the Zhoushan LNG receiving terminal, the first LNG receiving terminal-funded by ENN Group - will be very attractive for foreign oil and gas companies as it represents new opening-up opportunities for foreign players, she added.

"With new opportunities, diversified players, the region is believed to be a 'core battlefield' for the marketization of LNG trade in the country."

The Zhoushan LNG receiving terminal will start construction of its submarine pipelines this year. The first phase of the receiving terminal has a handling capacity of 3 million tons, and will expand to 10 million tons in 2022, according to ENN Chief Executive Officer Zhang Yesheng.

"Zhoushan LNG receiving terminal, serving as an important hub for connecting the domestic market and international resources, is looking to create an LNG value chain in Zhoushan and is responsible for LNG receiving, unloading, storage, shipments, diversion, sea and river intermodal transport, LNG bunkering, and cold energy utilization," said Zhang.

Its first phase involves an investment of 5.8 billion yuan ($863 million), and the second phase has an investment of 2.4 billion yuan.

China has built 21 LNG receiving terminals across the nation, with an annual receiving capacity of 80 million tons, according to CNOOC Chairman Yang Hua.