Sinopec, Iran gas supply dispute halts LNG plant

Sinopec has stopped work on an LNG receiving terminal in Qingdao because it has been unable to secure sufficient gas supplies following the collapse of a planned agreement with Iran.

Eric Watkins
Senior Correspondent

LOS ANGELES, Nov. 14 -- Sinopec has stopped work on an LNG receiving terminal in the coastal city of Qingdao, in China's Shandong Province, because it has been unable to secure sufficient gas supplies following the collapse of a planned agreement with Iran.

The $607 million regasification project—a joint venture of Sinopec and power firm China Huaneng Group—was to have an initial capacity of 3 million tonnes/year of LNG, rising to 5 million tonnes/year during a second phase.

Construction was originally scheduled to start in 2006 and complete in 2007.

China and Iran signed a memorandum of understanding in 2004 for Sinopec to buy 10 million tonnes/year of LNG from Iran for 25 years, but reports suggest that the two sides have failed to agree on contract terms.

The Iranians reportedly think Sinopec's price offer is too low, while Sinopec is said to be concerned that Iran's political instability poses investment risks to the project.

Sinopec reportedly is seeking new supply sources in Australia and is considering changing the location of the proposed plant. Reports did not say where.

Contact Eric Watkins at hippalus@yahoo.com.

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