PetroChina gets approval for Shenzhen LNG terminal

PetroChina, the nation's biggest oil producer, has won initial approval from the National Development and Reform Commission to build a liquefied natural gas receiving terminal in Shenzhen, a commission official said.
The company has been allowed to conduct a feasibility study for the project in the southern province of Guangdong, Hu Weiping, deputy head of the NDRC's oil and gas bureau told at the nation's legislature. The Beijing-based producer is selecting sites and assessing the technical and economic viability of the terminal, Hu said.

PetroChina is building gas import terminals on the nation's east coast as demand for the cleaner-burning fuel rises. The company may sign an agreement to buy LNG from ExxonMobil's Gorgon project in Australia under a term contract, Chairman Jiang Jiemin said March 5.
The Shenzhen terminal may cost as much as HK$ 8 bn ($ 1.03 bn).

"We have just received an application for the Exxon deal, and it is going through the approval process," Hu said. It will be up to PetroChina to decide whether the LNG from Exxon will supply the Shenzhen terminal, he added.
China is adjusting its plan to develop LNG because of changes in the economy, Hu said. The current lower prices offer a "good opportunity" for LNG buyers such as China, he said.

LNG pricing
The government plans to bring domestic natural gas prices in line with global levels to encourage imports of the fuel within a "workable" period of time, Hu said.
"It takes time to find a balanced pricing system acceptable to both suppliers and consumers," he said. The country will have to rely on domestic production, cross-border pipelines, LNG terminals and coal-bed methane to meet demand for natural gas, Hu said.

PetroChina has found gas reserves at the Longgang field in southwest Sichuan province, although here hasn't been a "definite result" on the size of the reserves, Hu said.
China, the world's second-biggest energy consumer, is planning a third natural-gas pipeline across northwest Xinjiang province, although the construction schedule has yet to be set, Wang Lequan, Communist Party chief for the province, said. Gas will be sourced from Turkmenistan, Uzbekistan and Kazakhstan, he said.

Drawing board
The first pipeline across Xinjiang to China's eastern regions has been in operation since December 2004. The second, costing more than yuan 250 bn, is under construction.
"The third link is still at the drawing board stage," Hu said. "Our current focus is on the second gas pipeline from Turkmenistan and to put it into commercial operation."

China has yet to secure a fuel source for the third link, Hu said.
"The original plan was to import from western Siberia, but we haven't reached an agreement yet," he added. A retail pricing formula for the second West-East gas pipeline, which terminates in Guangdong and Hong Kong, may be settled by the end of this year or the start of 2010, Hu said.

China National Petroleum Corp., PetroChina's parent, and Myanmar are still working on an agreement for a cross-border gas pipeline, and approval has not been given yet, Hu said.
Lower crude oil prices have given China the opportunity to plan on boosting imports to fill its reserves, Hu said.