China agrees to buy LNG from Exxon's Papua New Guinea venture

China, the world's second-biggest energy user, has agreed to buy liquefied natural gas from ExxonMobil's $ 11 bn venture in Papua New Guinea, said two people with knowledge of the transaction.
A state oil company signed an agreement to buy 2 mm tons of LNG a year, about 32 % of the project's proposed output, under a multiyear contract, said the two people.

China is building more than 10 LNG terminals on the eastern coast to meet a government target of doubling the use of the fuel by 2010. ExxonMobil and its partners, which include Santos and Oil Search, plan to give their final go-ahead for the project, the largest investment in Papua New Guinea, by the end of the year and start production by 2013 or 2014.
"There's room for China to add LNG supplies by 2015 because of doubling of terminal capacity between 2010 and 2015," said Tony Regan, an independent energy consultant and a former Royal Dutch Shell executive. "They would be in the market for additional volumes from 2015 when Papua New Guinea supply comes on."

The agreement, which needs approval from the buyer's government, is for the sale of 2 mm tons of LNG a year to "a major Asian customer," Port Moresby-based Oil Search said on April 21.
"Negotiations are progressing with targeted LNG buyers in the Asia region," Miles Shaw, public affairs manager for ExxonMobil's Esso Highlands PNG LNG unit, said. "The project anticipates a final investment decision will be taken by late 2009 with a corresponding first LNG cargo targeted for late 2013/2014."

China National Offshore Oil Corp. agreed to work with InterOil Corp. and the Papua New Guinea-owned Petromin PNG Holdings on a second LNG project in the Pacific island nation, Petromin said on April 16.
LNG is natural gas that has been chilled to liquid form for transportation by ship to destinations not connected by pipeline.

China is doubling LNG import capacity from 15.3 mm tpy in 2010 to 36.5 mm tons in 2015, Regan said. China has contracted supplies of 14.8 mm tpy by 2010, and faces a shortage of about 15.7 mm tons in 2015, he said.
China has signed agreements with producers in Qatar, Australia, Indonesia and Malaysia to purchase about 21 mm tpy of the fuel by 2015, Regan said.