CNOOC Fujian lets EPC contract for LNG site

Eric Watkins
Oil Diplomacy Editor

LOS ANGELES, Jan. 11 -- CNOOC Fujian LNG Co. Ltd. has let a contract to Chicago Bridge & Iron (CB&I) for engineering, procurement, and construction of two additional 160,000 cu m full-containment LNG storage tanks at CNOOC's LNG import terminal expansion in Fujian Province, China. The work is scheduled to be completed in 2011.

The award follows CB&I's completion of the first phase of the Fujian import terminal, which has two 160,000 cu m LNG storage tanks. The terminal received its first shipment of LNG in April 2008.

The 60,000-tonne spot shipment, from Egypt's Idku LNG plant, was supplied by BG Group, which owns 35.5% of train 1 and 38% of train 2 at the Idku liquefaction facility.

Since then, the 2.6 million tonnes/year Fujian terminal has been receiving spot cargoes while awaiting term supply from Indonesia's Tangguh LNG project.

Indonesia, in the wake of sharp increases in global oil prices, was seeking a price increase to $10/MMbtu for its Tangguh supplies.

Under the contract signed by China and Indonesia in 2002, the price of LNG from the Tangguh project was pegged at $2.40/MMbtu, regardless of any increases in crude oil prices.

China has already agreed to raise the price to $3.80/MMbtu, but Indonesia declined the offer and is seeking a new round of negotiations.

New LNG supplies sought
Meanwhile, a CNOOC Fujian LNG spokesman said the new tanks are part of a Phase II expansion at the terminal aimed at meeting future local demand and that the company is conducting a study on obtaining additional LNG supplies.

The Fujian terminal has commitments to supply regasified LNG to city gas companies in Fuzhou, Putian, Quanzhou, Xiamen, and Zhangzhou as well as three gas-fired power plants in Putian, Jinjiang, and Xiamen, which will account for more than 80% of consumption.

Expansion of the Fujian terminal also is part of the Chinese government's broader strategy to increase LNG's share of national energy consumption to 10% by 2015.

By 2020 about 25% of China's natural gas demand is forecast to be met through LNG imports, according to the US Energy Information Administration, which sees China's natural gas demand growing by 6.4%/year during 2010-20.

CNOOC Fujian LNG Co. Ltd. is a joint investment of China National Offshore Oil Corp. 60% and local firm Fujian Zhongmin Corp. 40%.

Contact Eric Watkins at hippalus@yahoo.com.

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