CLP, CNOOC clash over Yacheng gas supply outlook

Eric Watkins
Senior Correspondent

LOS ANGELES, Dec. 14 -- CLP Holdings Ltd., Hong Kong, has rejected claims by its natural gas supplier, a consortium of China National Offshore Oil Corp., BP PLC, and Kuwait Foreign Petroleum Exploration Co. (Kufpec), that Yacheng gas field off Hainan Island has sufficient reserves to supply Hong Kong through 2036.

Liu Zhijie, general manager of CNOOC China Yacheng Operating Co., the consortium leader, said on Dec. 12: "We believe the gas field is capable of providing a stable gas supply to Hong Kong for more than 30 years as long as we drill more production wells."

CLP said it is "surprised" at the claim, which coincides with reports that demand growth for gas on Hainan Island, now rising by 23%/year, will create a shortfall during 2006-10, because supplies are forecast to increase by only 18%/year.

CNOOC, however, said it plans to invest $80 million on drilling 3-4 production wells after 2009, lifting the total number to as many as 15 and expanding the exploration area to 322 sq km.

CNOOC discovered Yacheng gas field in 1983 and owns a 51% stake, while BP and Kufpec share the remaining 45%. Yacheng reserves are pegged at more than 100 billion cu m.

Gas from the field is carried to Hong Kong through a 780-km subsea pipeline and delivered to Black Point power station in Tuen Mun.

CLP, which consumes 2.5 billion cu m/year of gas, or 83% of Yacheng's annual output, insists that building an LNG import terminal of its own is the only solution to resolving what it sees as a future gas supply problem.

CNOOC and China Petrochemical Corp. have been developing a similar plan for LNG terminals along the coast of Guangdong, near Hong Kong.

CLP decided to build its $8 billion (HK) LNG terminal on the Soko Islands, southwest of Lantau, after conducting an independent assessment of the gas field in 2002, concluding that the field's reserves would not be sufficient to meet increased demand for gas in Hong Kong.

CLP's claims coincided with concerns that Hainan Province itself may suffer a gas shortage in 2006-10 that could become "severe," according to the island's governor, Wei Liucheng.

At a conference on Dec. 12, Wei said Hainan Province's gas consumption is estimated to reach 2.674 billion cu m in 2006 alone, but will rise over the next 5 years to 6.41 billion cu m.

On the supply side, he said gas to Hainan is forecast to total 5.2 billion cu m during 2006-10, yielding a shortfall of about 1.21 billion cu m.

Contact Eric Watkins at hippalus@yahoo.com.

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