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CNOOC receives first shipment of LNG from Qatargas

By Chen Hong and Wan Zhihong (China Daily)
Updated: 2009-10-20 10:08

China National Offshore Oil Corp (CNOOC), the country's leading offshore oil producer, has received its first cargo of liquefied natural gas (LNG) from Qatar, after a long-term supply deal signed last year.

The cargo, of 216,000 cu m, arrived at CNOOC's Dapeng LNG terminal in Shenzhen on Sunday. The terminal is about 45 km away from downtown of the southern city.

It comes under a long-term supply agreement signed between CNOOC and Qatargas last June, under which Qatar would supply 2 million tons of LNG per annum for 25 years.

The first shipment serves as an important landmark in the energy cooperation between China and Qatar, said Fu Chengyu, chairman of the State-owned CNOOC, at the receiving ceremony yesterday.

"It will help China improve the utilization of clean energy and optimize the energy consumption structure and strengthen CNOOC's role in developing clean energy," he added.

Faisal Al-Suwadi, CEO of Qatargas, said the new partnership would be highly beneficial. "The world's largest LNG producing company has begun supplying what may become the world's largest LNG market," he said.

The LNG from Qatar will be offloaded to other terminals of CNOOC, including the existing one in eastern China's Fujian province and the soon-to-be operational one in Shanghai, to serve the booming economy in coastal areas of eastern and southern China, Fu said earlier.

China will see rapid increase of natural gas consumption in the next few years, as the government is encouraging more use of clean fuels to reduce pollution, Raymond Ng, partner at Ernst & Young told China Daily.

The deal value has not been disclosed yet, but some market observers speculated that the price of Qatari LNG would be indirectly pegged with the index of the Japan Customs-cleared Crude, which will be higher than what the domestic users can support.

Related readings:  China to import more LNG from Qatar  CNOOC, BG group sign agreement for Australian LNG project  Fujian receives first LNG supply  CNPC to import 2.25m tons of LNG annually from Australia

However, a CNOOC insider told China Daily that the company was under no pressure to sell the fuel and that the cost would be greatly reduced once the LNG consumption market matures.

"Currently, the big consumers of LNG are power plants and industrial users," he said. "It has great potential to cut the costs during the gasifying process, so the contracted price of the LNG doesn't mean a lot."

It has been reported that Shenzhen Nanshan Power Co and its Dongguan holding company will soon sign a long-term purchase deal with CNOOC's Guangdong trading company.

Meanwhile, CNOOC Gas & Power Group, a subsidiary of CNOOC, has also inked an agreement in August with CNOOC's refining complex in Huizhou, reportedly for an annual gas supply volume of 680,000 tons.