Top Biz News

Nation signs LNG deal with Petronas

By Wan Zhihong (China Daily)
Updated: 2006-10-31 08:57

China, the world's second biggest energy user, has reached a US$25 billion agreement to buy LNG (liquefied natural gas) from Malaysia over 25 years to meet rising demand.

The LNG will supply Shanghai, where China National Offshore Oil Corp (CNOOC) and its partner Shenergy Group are building a receiving terminal for the fuel, Petroliam Nasional Bhd (Petronas), Malaysia's national oil company, said on its website yesterday.

According to the 25-year contract, the LNG supply will grow year-by-year to 3 million tons in 2012 and delivery will be kept stable at that level.

The contract is valued at US$25 billion at current prices, Malaysia's Bernama news agency said.

"The contract is so far the largest trade contract between the two countries, marking the beginning of the energy co-operation," said Petronas.

"The agreement was signed on July 2006. The deal was formally announced by Chinese Premier Wen Jiabao and Malaysian Prime Minister Abdullah Ahmad Badawi after they held a bilateral meeting in Nanning, South China's Guangxi Zhuang Autonomous Region," it said.

"This is Petronas' first LNG deal with China," it said. "The signing of the deal marked a major breakthrough for Petronas into China's energy sector."

The Malaysian company draws its natural gas supplies from the Bintulu region, one of the world's largest LNG production bases, in east Malaysia. Petronas has an annual LNG output of 23 million tons and mainly supplies countries like Japan and the Republic of Korea.

CNOOC is leading the push for LNG terminal construction along the eastern coast amid China's efforts to diversify the nation's energy supply and alleviate its heavy reliance on coal and oil. The company said earlier it had signed master agreements for LNG spot cargoes with Suez SA, Total SA and Shell Eastern Trading (Pte) Ltd on October 5, 6 and 10.

In September CNOOC finalized a deal to buy LNG from the Indonesian Tangguh gas project for its LNG terminal in East China's Fujian Province.

Earlier media reports said that China's three largest domestic oil companies had submitted applications to the National Development and Reform Commission to lift the LNG price. However, a CNOOC spokesman denied the reports, saying that the company had not submitted any such application.