China National Offshore Oil Corp, the country's third-largest oil and gas producer, has secured a deal with Malaysia's Petronas to supply liquefied natural gas to a terminal in Shanghai.

The deal would be priced at US$5 to US$6 per million British thermal units, higher than the previous pacts signed by CNOOC with Australian and Indonesian suppliers in 2002 but well below the US$9 to US$11 spot price.

The Shanghai LNG terminal project is co-invested by the local firm Shenergy Group, which holds 55 percent interest, and CNOOC, which owns the remainder. The operation's first phase, with capacity to handle 3 million tons of LNG, is expected to come on stream in June 2008.

The terminal is one of the many LNG receiving facilities planned in the country's eastern coastal region.

But due to high prices for the clean-burning fuel, the construction of many of LNG terminals has been delayed. LNG is just not price competitive with coal in China.

In Shanghai, China's financial hub, the municipal government has been encouraging the use of natural gas. In the past few years, natural gas has been the fastest growing energy sector in the city.

This year, Shanghai's natural gas demand is expected to be 2.9 billion cubic meters while supply stands at only 2.2 billion cubic meters.

Source:佚名