Qatar Discusses LNG Supply With Sinopec
By Alex Delmar-Morgan And David Winning
18 January 2011
The Wall Street Journal Online
Copyright 2011 Dow Jones & Company, Inc. All Rights Reserved.
DOHA—Qatar has begun talks on supplying natural gas to China Petroleum & Chemical Corp, known as Sinopec Corp., in the latest move by the resource-rich Arab emirate to build exposure to fast-growing Asian demand for cleaner fuels.
Qatar has already committed to supplying 12 million metric tons of liquefied natural gas, or LNG, annually to Sinopec's domestic rivals PetroChina Co. and China National Offshore Oil Corp. in a mix of preliminary agreements and binding contracts.
"Sinopec would like to enter for LNG so they have just started to discuss with Qatargas Operating Co.," Qatari oil minister Abdullah bin Hamad Al Attiyah told Zawya Dow Jones on Monday.
He didn't specify the LNG volumes that Sinopec is seeking to buy. A Sinopec representative declined to comment Tuesday.
Qatar is focusing more on Asia after U.S. demand for LNG, a super-cooled gas transported by ship, virtually dried up when energy companies found ways to produce natural gas from shale rock formations economically.
Six years ago, there were plans for 55 new or expanded LNG receiving terminals in North America. But only a handful of these have been built, even though natural gas heats about half of U.S. homes and generates 20% of the nation's electricity.
Low U.S. natural gas prices have also played a role in stifling the Middle East-North America LNG trade. At around $4.50 per million British thermal units on the New York Mercantile Exchange, current natural gas prices are well below their peak near $14 in the summer of 2008.
In contrast, demand for natural gas in Asia is booming. This reflects not only rapid economic growth but also the region's historical reliance on burning coal for power and heating, which has left countries such as China and India grappling with worsening pollution problems.
China will increase natural gas use from nine billion cubic feet a day in 2009 to 43 billion cubic feet a day by 2030, Edinburgh-based energy consulting firm Wood Mackenzie predicts. China is building massive infrastructure to funnel in gas, including pipelines from Central and Southeast Asia and multibillion dollar terminals to receive LNG ships along its coast.
Cnooc, China's third-largest oil and gas producer by output, began importing LNG from Qatar in 2009, a year after signing the contract for two million tons of LNG annually.
PetroChina also has a binding deal with Qatargas for three million tons of LNG, which will be shipped either to terminals in eastern Jiangsu province or northern Liaoning province when they become operational this year.
But the pace at which China's energy demand is growing is prompting China's companies to seek higher LNG volumes, not only from the Middle East but also from new export-oriented projects in Australia and Papua New Guinea.
PetroChina and Cnooc signed preliminary agreements with Qatargas in November 2009 for an additional seven million tons of LNG, bringing the two Chinese companies' total proposed LNG purchases to 12 million tons annually.
Speaking following a visit to China last week, Mr. Attiyah said Qatar is "very close" to converting those preliminary agreements into binding deals.
He also vowed to strengthen cooperation with China in other oil and gas industries. He held discussions with Chinese energy officials about a planned petrochemical plant, a joint venture between Qatar Petroleum International, Royal Dutch Shell PLC and PetroChina.
Shell and Qatar Petroleum International would each have 24.5% stakes in the refinery and petrochemical plant, with PetroChina having majority control and a 51% interest. The complex is likely to be built in Taizhou city in China's eastern Zhejiang province.
Mr. Attiyah also discussed plans for another petrochemical and refinery complex with Cnooc, the state-owned parent of Hong Kong-listed Cnooc Ltd. He didn't give more details.
Wan Xu in Beijing contributed to this article.