CNOOC buying stake in Indonesia Tangguh LNG project

By OGJ editors

HOUSTON, Oct. 2 -- CNOOC Ltd. agreed to buy a 12.5% stake in the reserves and upstream production of the Tangguh joint LNG project in Indonesia from BP PLC in what CNOOC Ltd. calls an acquisition "complementary to its natural gas strategy."

The Tangguh LNG project is operated by Indonesian state oil and gas enterprise Pertamina and BP unit BP Indonesia in Berau Bay, Irian Jaya (Papua). Tangguh consists of three offshore production-sharing contracts (PSC) and the planned onshore LNG terminal. Pertamina will own the terminal, which will be operated by a company jointly owned by Pertamina and the PSC partners.

In a heads of agreement on Tangguh, CNOOC Ltd. agreed to pay BP $275 million to acquire interest in the Tangguh's PSCs. The areas involved are the Berau PSC, the Muturi PSC, and the Wiriagar PSC (OGJ Online, Nov. 7, 2001).

Tangguh project partners have a 25-year supply contract to provide up to 2.6 million tonnes/year of LNG to a planned LNG terminal at Fujian, China, beginning in 2007. The terminal would be built on the coast of southern China, opposite Taiwan.

Construction of the Fujian terminal is expected to start in 2004, and the terminal is expected to be ready to receive LNG in mid 2007, Mark Qiu, CNOOC Ltd. chief financial officer, told reporters in an Oct. 1 conference call.

He also expressed confidence in the market for LNG, saying 2.6 tonnes/year is a "fairly conservative" volume that could provide natural gas for only two or three power plants.

Wei Liucheng, CNOOC Ltd. chairman and CEO, said in a Sept. 27 news release that, "The acquisition of a material stake in the Tangguh joint venture. . .would expand both the company's natural gas reserves and our upstream presence in Indonesia. This proposed acquisition, together with our recently announced proposal to acquire an upstream interest in Australia's North West Shelf's Gas Project, would be a substantial step in executing our commitment to supplying natural gas to the rapidly growing market in China."

Previously, CNOOC Ltd.'s parent—China National Offshore Oil Corp.— and Guangdong LNG partners selected Australia's North West Shelf venture to supply China's first LNG imports terminal planned at Guangdong in southern China (OGJ, Aug. 19, 2002, p. 9).

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