BP Amoco likely to win LNG supply contract to China
BP Amoco likely to win LNG supply contract to China
BEIJING (Dow Jones): BP Amoco PLC (BP) is likely to win the supply contract for China's first liquefied natural gas project, but will need to give up equity in its gas fields as part of the deal, the China Daily reported on Thursday.
China is still evaluating bids for the $10 billion contract to supply a yet to be built receiving terminal in Shenzhen with 3 million metric tons of LNG a year. BP has already been invited to take a stake in the $600 million terminal project, the first of its kind in China.
"BP, as the sole foreign partner of the project is the first choice under equal conditions," the newspaper reported, citing Zhao Xiuguang, director of the natural gas department of China National Offshore Oil Corp., or CNOOC.
The report appeared to confirm speculation that CNOOC will demand upstream equity as part of any supply deal.
"CNOOC will have a share in the gas fields supplying the project, but won't hold a dominant stake," the newspaper also reported, quoting Wu Fengliang, deputy manager of CNOOC's overseas development department.
BP Amoco has a stake in Australia's North West Shelf project and Indonesia's Tangguh as well as a gas field in Malaysia.
The consortium producing liquefied natural gas in Australia's north west shelf is ready to offer natural gas equity to China in order to win a US$10 billion contract to supply China with LNG, a senior industry official said in a recent interview.
Alf D'Souza, vice president of Australian LNG Pty Ltd., told Dow Jones Newswires in an interview that Australia welcomes China's participation in the natural gas development.
D'Souza has also expressed interest in Chinese companies participating in the north west shelf project - Australia's only existing LNG producer. China already has heavy investments in iron ore and alumina production in Australia.
He said as China is mulling LNG supplies to its first LNG project in southern China, the country appears keen to have some upstream equity in the producing countries so as to ensure long- term and stable supplies.
Proven and probable gas resources associated with the north west shelf project alone currently total 30 trillion cubic feet, sufficient to underpin Australia's current production for 30 years, D'Souza said.
However, he said this is only part of a bigger picture, which includes a series of gas discoveries in the greater north west shelf region and northern Australia currently estimated to total more than 100 trillion cubic feet.
In addition, D'Souza said the region has a potential of between 50 trillion and 170 trillion cubic feet in future discoveries.
Competition for the supply contract has heated up since China last week announced it has shortlisted BP Amoco PLC (BP) as the foreign investor for a 30 percent stake in the $600 million LNG terminal project in southern China's Guangdong province.
Australia is one of the major competing countries for the supply contract. Other potential suppliers include Indonesia, Malaysia, Yemen and Qatar.
D'Souza said Australia is well-positioned amid the competing suppliers to win a share of China's LNG market.
A senior Qatar delegation will be paying a second visit to Beijing next month to lobby for the supply contract, following up on a visit to Beijing last year by the country's energy minister.
A government-appointed consortium led by China National Offshore Oil Corp., or CNOOC, is expected to begin the tender for the supply contracts later this year.
China said the first phase of the Guangdong project calls for a supply of 3 million tons a year by 2005, expandable to 5 million tons/year in the second phase by 2007. Construction of the terminal, the first of its kind in China, is expected to begin next year.