The Rising Influence of Rising Affluence

[DewDiligence]

XOM Inks 20-Year LNG Deal With Sinopec

http://www.reuters.com/article/idAFPEK21007620091203

›Dec 3 2009

BEIJING, Dec 3 (Reuters) - China's Sinopec Corp <0386.HK> has struck its first deal to purchase liquefied natural gas, agreeing to buy 2 million tonnes per year for 20 years from ExxonMobil's Papua New Guinea project, Sinopec Group said on Thursday.

The gas will go to a planned LNG terminal at Qingdao in Shandong province, which will have an annual capacity of 3 million tonnes in its first phase, rising to 5-6 million tonnes a year in a later second phase, the state-owned parent company, Sinopec Group, said on its website www.sinopecgroup.com.cn.

It did not give a detailed agenda for the start-up of the Qingdao LNG terminal or say when the sales would begin.

Sinopec has planned the Qingdao terminal for several years but it had made little progress as it has not been able to secure LNG supplies, lagging behind rivals CNOOC <0883.HK> and PetroChina <0857.HK>, which already have three and two terminals respectively, at various states of development.

Sinopec also plans to build a terminal in the southern city of Zhuhai but has yet to get a green light from the government.

China is struggling to supply enough gas and suffered widespread shortages after unexpectedly heavy snows across the country last month. The shortages prompted the energy companies to cut supplies to industrial customers to ensure there was enough to cover residential needs.

China is pushing gas as a relatively clean fuel which will cause less pollution than coal. As well as building LNG terminals, it is rushing to increase its own supplies and plans to import gas via pipelines from Russia, Myanmar and Turkmenistan.

ExxonMobil and Sinopec Corp <600028.SS> reached a preliminary deal on the 2 million tonnes a year of LNG sales at the beginning of November.

ExxonMobil holds 41.5 percent of the shares in the LNG venture, while Australia's Oil Search Ltd <OSH.AX> and Santos Ltd <STO.AX> have 34 percent and 17.7 percent stakes respectively. Nippon Oil Corp <5001.T> and PNG landowners hold the remaining shares.‹