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Malaysia's Petronas clinches 25 billion dollar gas deal with China
By Elisia Yeo
AFP
NANNING, China
Petroleumworld.com 10 31 06
Malaysia's state energy firm Petronas said Tuesday it will supply China with liquefied natural gas for the first time in a landmark deal reportedly worth 25 billion dollars over 25 years.
Petronas will supply 3.03 million metric tonnes of natural gas annually to China's Shanghai LNG Company Ltd., the Malaysian firm said in a statement.
The value of the contract is estimated to be worth 25 billion dollars based on current prices, the New Straits Times newspaper said.
"This is Petronas' first LNG deal with China. The deal will further enhance the economic ties between the two countries," the oil and gas producer said in a statement.
The deal was unveiled by Malaysian Prime Minister Abdullah Ahmad Badawi and China's Premier Wen Jiabao on the sidelines of the China-ASEAN summit in south China's Nanning city on Monday.
"Energy is a key cooperation area between the two countries," Chinese government spokesman Qin Gang told reporters in a briefing on contents of the bilateral meeting.
"Malaysia welcomes Shanghai's purchase of LNG from Malaysia and (Abdullah) also hopes that the two countries can further promote their cooperation in this particular area," Qin described Abdullah as telling Wen.
The deal was the latest in a string of natural oil and gas deals for China which is urgently scouring the globe for fresh supplies to power its booming economy and a growing middle class snapping up energy-consuming appliances.
"This is just one of the LNG deals that they need to do," said Albert Kwong, chief of PetroAsian Energy, a consultancy based in Hong Kong advising on Sino-foreign energy tie-ups.
"China's gas situation is really pretty urgent, it's pretty bad," he said, adding that if China were not to ramp up gas imports it would use up its own relatively small reserves by 2020.
In 1996, China's energy bureau called for natural gas production to rise to 25 billion cubic meters and for 70 percent of urban households to use gas fuel by 2000.
Natural gas is much less polluting that the coal which still generates most of China's electricity.
Today, China consumes about 43 billion cubic meters of natural gas per year and experts like Kwong expect that to rise to 113 billion tonnes by 2015.
China has accordingly pressed ahead on major supply deals with Australia,
Indonesia, Iran, Turkmenistan, Russia and Kazakhstan.
In its most recent agreement, China National Offshore Oil Corp (CNOOC) finalized a deal in September worth 8.5 billion dollars for Indonesia to supply the nation's southeast with 2.6 million tonnes of LNG annually over 25 years.
That deal was originally signed in 2002 but was then renegotiated to adjust for higher energy prices.
Also in 2002, China inked another 25-year accord worth 18 billion dollars for the supply of 3.3 million tonnes of LNG annually in what was Australia's biggest energy deal.
Petronas said the LNG will be delivered from its LNG Complex in Bintulu, Sarawak to Shanghai LNG's receiving terminal at Zhong Ximentang Island, in Zhejiang Province.
The Shenergy Group, a state-owned energy company based in Shanghai, holds a 55-percent stake in the project, while CNOOC, China's largest offshore oil company, holds the other 45 percent.
CNOOC Gas and Power is a wholly-owned subsidiary of China national Offshore Oil Corporation.
AFP 31 08 13 GMT 10 06
Copyright ©2006 AFP All Rights Reserved.
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