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China makes bold LNG advances
Gary Park For Petroleum News
China’s stable of state-owned energy companies has suddenly injected a serious tone to British Columbia’s LNG outlook.
China Petrochemical Corp. (better known as Sinopec) gave a major lift to Pacific NorthWest LNG April 29 by acquiring a 15 percent stake in the project operated by Malaysia’s state-owned Petronas, less than a week after a unit of China National Offshore Oil Corp. signed an agreement to buy LNG from the Prince Rupert LNG terminal, to be operated by the United Kingdom’s BG Group.
The Sinopec deal involves an initial 20-year contract to buy 3 million metric tons a year from Pacific NorthWest in addition to 1.8 million metric tons a year in an equity offtake.
The transaction comes less than two months after state-owned Indian Oil Corp. took a 10 percent stake in the project.
The all-Asian partnership has also seen Japan Petroleum Exploration through Japex Montney acquire a 10 percent share, while state-owned Petroleum Brunei holds 3 percent, all of those agreements involving long-term LNG off-take orders.
Petronas still owns 62 percent, but has indicated it would like to attract other partners to reduce its share to 50 percent.
The terms of the Sinopec deal were not disclosed, but National Energy Board approvals allow Pacific NorthWest to export an initial 12 million metric tons a year and possibly add another 6 million metric tons, with first shipments slated for early 2019.
Canadian momentum Maxim Sytchev, an analyst at Dundee Capital Markets, said in a note to clients that although the market has known for some time that a large Asian party was negotiating with Petronas, landing Sinopec shows that “Canadian LNG momentum is gathering visibility.”
Sinopec’s own natural gas holdings in the Montney formation and the Duvernay in British Columbia and Alberta are seen as a natural fit with Petronas’ assets in the Montney area.
“The geopolitical uncertainty in Europe, where energy has once again become a policy tool, makes the potential Canadian supply an attractive option from a supplier perspective,” Sytchev said.
Michael Culbert, chief executive officer of Petronas subsidiary Progress Energy, said the addition of another Pacific Rim market and investment in Pacific NorthWest “highlights the attractiveness of Canadian natural gas.”
Terms of the CNOOC-BG Group deal were not disclosed, but the agreement gave a major lift to BG hopes of gaining an Asian partner to help finance its hopes of building a C$16 billion project with a terminal at Ridley Island near Prince Rupert to export 21.6 million metric tons a year over 25 years.
What isn’t clear is the impact of CNOOC’s role in the Prince Rupert project on the Aurora LNG project which is owned 60 percent by CNOOC unit Nexen, with Japan’s Inpex and JCC Corp. as junior partners.
Of China’s other energy powerhouses, PetroChina controls 20 percent of the LNG Canada project operated by Royal Dutch Shell.
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