Sinopec raises APLNG stake

Nation's largest oil refiner strikes a deal to buy an extra 10 percent in gas venture

BEIJING - China Petrochemical Corp, the country's biggest oil refiner, has signed a deal to increase its stake in the coalbed methane producer Australia Pacific LNG Pty Ltd (APLNG) to further tap into sources of unconventional natural gas overseas.

China Petroleum, also known as Sinopec Group, said in a statement on Monday that it will acquire an additional 10 percent of APLNG, which is jointly owned by ConocoPhillips Co and Origin Energy Ltd.

No financial details about the deal have been revealed.

Sinopec, which clinched an agreement to buy a 15 percent stake in the joint venture for $1.5 billion in April, said it will also buy an extra 3.3 million tons of liquefied natural gas annually from the venture until 2035, making for a total of 7.6 million tons a year.

In April, Sinopec had agreed to purchase an annual 4.3 million tons of LNG for 20 years from 2015 onwards, making it the company's first overseas source of unconventional gas.

A Sinopec spokesman, Huang Wensheng, said the final agreement is still under negotiation but is expected to be completed soon. The company said the Australian project will be divided into two phases. The first phase, consisting of 4.3 million tons, is to be unloaded at Beihai Terminal in Guangxi Zhuang autonomous region in 2015. The details are still unclear about the timing of the second phase and which terminal will be used.

The agreement will further meet Sinopec's rapidly increasing demand for energy and will supply more clean energy to the country, said Sinopec chairman Fu Chengyu in the statement.

"APLNG has good upstream resources," Huang said. "We think the company will provide reliable resources for us to secure our gas supply."

The cooperation will help boost Sinopec's exploration technologies in the coalbed methane sector and pay its way by tapping further into the unconventional gas arena, said Zhou Xiujie, an energy analyst at China Investment Consulting.

China has stepped up efforts to increase the supply of natural gas to satisfy ballooning domestic energy demand and as a means of cutting carbon emissions.

Figures from the National Development and Reform Commission show that China's apparent consumption of natural gas (which includes domestic output and imports, but excludes exports) reached 93.7 billion cubic meters (cu m) in the first nine months of this year, an increase of 20 percent from 2010. Between the same two periods, domestic production increased by 7 percent.

Meanwhile, the nation's natural gas imports rose 89 percent year-on-year to 22.5 billion cu m over the same period, half of which was liquefied natural gas.

In November, Sinopec's rival PetroChina Co Ltd received the first cargo of the gas from the world's top exporter, Qatar. It was received at the company's newly operational Rudong LNG terminal in Jiangsu province. According to an agreement signed in 2008, Qatar will supply 3 million tons of natural gas annually to PetroChina for 25 years.

"The natural gas sector is strategically important for the nation's State-owned oil companies ... the LNG market is going to a fierce battleground for them in the near future, given the escalating demand for cleaner fuel," Zhou said.

China Daily

(China Daily 12/13/2011 page15)