China’s Sinopec, Huadian take 15% of PETRONAS’s Canada LNG scheme

02 May 2014  |  By: Edward Cox

State-run China Petroleum Corporation (Sinopec) and Huadian have between them acquired a 15% stake in the Western Canadian LNG export project led by Malaysia’s state-run PETRONAS, adding the fourth and fifth long-term offtake buyers to the venture.

Out of the 15% stake, two-thirds will go to Sinopec with the other third designated for state-owned power generator China Huadian, according to a statement issued by Sinopec on 30 April. Volumes will be shared between the two companies with Sinopec taking 1.2mtpa and China Huadian 600,000 tonnes/year.

A previous statement noted that Sinopec had secured a minimum 20-year supply term for 1.8mtpa and upstream gas reserves to match its percentage stake from Pacific NorthWest LNG. Huadian was subsequently named as taking part of this equity.

Sinopec agreed to another 3mtpa for a 20-year term, sourced primarily from the Canadian project, through a heads of agreement (HOA) with PETRONAS.

The project is a two-train, 12mtpa liquefaction complex near Prince Rupert, British Columbia.

Japanese refiner JAPEX (10%), PetroleumBRUNEI (3%) and state-run Indian Oil Corporation (10%) have previously secured stakes in the venture. PETRONAS will now hold a 62% stake.

The 29 April announcement solidifies months of speculation that Sinopec was close in talks with the PETRONAS-led venture. Market sources close to the Canadian projects earlier said Sinopec was also in discussions with US-based oil and gas major Chevron on its proposed 10mtpa Kitimat LNG export project. But no final sales and purchase agreement has yet been signed with Kitimat, which was initially viewed as a first-mover project in the region.

PETRONAS, through its acquisition of Canadian gas producer Progress Energy, and its LNG partners hold 5.76 trillion cubic feet of equivalent natural gas, or about 163 billion cubic metres, according to a year-end 2013 evaluation of the resources, known as the North Montney Joint Reserve.

A final investment decision (FID) is expected to be reached in late 2014. The project has progressed in its front-end engineering and design (FEED) stage, and an engineering, procurement and construction (EPC) provider is due to be selected in the third quarter of 2014. First LNG is planned for 2018.

Sinopec builds supply around Pacific

The entry into PETRONAS’s British Columbian project as an LNG offtaker ties together Sinopec’s upstream resources in North America.

Sinopec has oil and gas reserves of its own in western Canada, through a $2.1bn acquisition in 2011 of the Canadian gas producer Daylight Energy. According to the company’s 2013 results, Sinopec Daylight increased its proved and probable reserves for oil and gas to more than 246m barrels of oil equivalent.

In late 2013, the company’s parent organisation, Sinopec Group, indicated that it wanted to sell down half of its two largest shale plays, but a transaction has not yet been completed.

Sinopec is poised to begin receiving this year part of its 2mtpa in long-term supply from the ExxonMobil-led Papua New Guinea (PNG LNG) export plant. This coincides with the start-up of Sinopec’s 3mtpa Qingdao terminal in the Shangdong province in eastern China.

Sinopec is also expected to ramp up its regasification capacity through the opening of the 3.5mpta Beihai LNG terminal in Guangxi by the end of 2015, and a 3mtpa terminal in Tianjin in northern China by 2016. Ruth Liao

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