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Chinese oil group in 25-year deal for Qatar's LNG
Source: BI-ME and Dow Jones Newswires , Author: BI-ME staff
Posted: Fri May 30, 2008 12:00 am

QATAR. China National Offshore Oil Corp (Cnooc Group), the parent of Cnooc, said yesterday it had signed a binding “market price” contract with Qatargas Operating Co to import liquefied natural gas from Qatar.

The Qatar agreement again indicates China’s strong appetite for the cleaner fuel on the back of its booming economy, forcing the country not to miss out on scarce LNG supplies.

Cnooc Group President Fu Chengyu told reporters the company plans to import 2 million tonnes of LNG a year from Qatargas for 25 years.

Fu said the company would be paying the “market price” for the LNG, but declined to give further details.
The agreement follows a non-binding heads of agreement signed in April for the supply of 2 million tonnes of LNG annually from the Qatargas 2 project.

“The gas will be supplied to our facility in Zhejiang and our other LNG terminals along the coast,” he said.
Cnooc Group is planning to build an LNG receiving terminal in Ningbo, a port city in the Eastern province of Zhejiang province.

It is also building LNG terminals in Fujian province and Shanghai. It is looking at a terminal of similar size at Zhuhai in Guangdong province and a smaller facility on Hainan island.

China has only one LNG receiving terminal in operation, Cnooc Group’s Dapeng LNG terminal in Guangdong province. It sources LNG from the North West Shelf venture in Australia contracted at US$2.50 to US$2.70 per million British thermal units, much lower than international norms.

Fu, also the Chairman of Cnooc, said it plans to take a 66% to 67% stake in a consortium that has won a tender to explore and develop an oil and gas block in Indonesia. The Indonesian government said earlier it awarded five blocks to investors, of which one was to a consortium of Cnooc, Southeast Asia Co and Petronas Carigali Overseas. Fu declined to give more details.

He also said that the Cnooc Group and foreign partners will start exploring hydrocarbon potential in deep waters offshore China in the second half of this year.

“We plan to drill six wells in the second half. This will be a very important thing for us. But the supply of rigs is tight and the costs of leasing them are very high,” he said.

He said the total cost of leasing one rig is about US$1 million a day.

The foreign partners are Devon Energy Corp and Anadarko Petroleum Corp (APC) from the US, Canada’s Husky Energy and Britain’s BG Group.

When asked what targets are on Cnooc’s acquisition radar, Fu said: “Overseas acquisition is only part of a strategy, but it’s not where the growth mainly comes from. You can’t depend on mergers and acquisitions to grow.”

 

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