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Energy Insights: Energy News: China, foreign price gap may defer LNG schedule

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China, foreign price gap may defer LNG schedule


BEIJING, Dec. 2   Xinhuanet

A senior official with China National Offshore Oil Corporation (CNOOC), China's largest offshore oil producer, has said that the price gap between domestic and foreign liquefied natural gas (LNG) may defer China's LNG schedule.

The plan to establish 10 LNG receiving stations by 2010 now confronts some difficulties, said Zhang Weiping, deputy chief economist for CNOOC at the 2nd Sino-Russo-Kazakh Oil forum held here.

China plans to establish 10 to 11 LNG receiving stations at the areas along the coast by 2010, when the country's LNG import may reach 30 million tons.

However, the international gas price is surging to a new level owing to the soaring international oil price and the temporary lack of LNG refining infrastructures.

As a consequence, China's natural gas price still remains at a comparatively low level.

China's natural gas price is only a little higher than that of coal, still lower than urban coal gas, liquefied petroleum gas, fuel oil and electricity.

Still in its early developing phase, China's natural gas market cannot sustain a higher price level, said Zhang.

China therefore has to import LNG at the international price, which is comparatively high, while having to sell it at a lower price because of the immature market.

The price has become a major problem in China's bargain for LNG imports, said Zhang.

Chevron announced last week that CNOOC's preliminary agreement to buy 100 million tons of LNG from the Chevron-led Gorgon project in Australia in 25 years has fallen through on pricing and timing issues.

Nevertheless, Zhang is confident about China's LNG development, saying the "tendency cannot be changed".

China is endeavoring to put into practice its strategy of multi-channel energy supply.

"As a clean and efficient energy, it can be definitely be said that LNG has a good prospect in China," said Zhang.

According to him, CNOOC will have four to five LNG receiving stations established and put into operation in the next five years.

As China's LNG project pioneer, CNOOC has signed long-term contracts buying LNG from Australia and Indonesia respectively to feed its projects in Guangdong and Fujian.

The supplier for the projects in East China's Zhejiang Province and Shanghai Municipality that CNOOC has already started is still under negotiation and the one in South China's Hainan Province is awaiting permission from the central government, said Zhang. Enditem

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