China persisting in quest for global gas


HONG KONG: Gas-hungry China will have to keep scouring the globe for liquefied natural gas in the coming decade, despite a couple of record discoveries at home this year, senior industry executives and experts say.China, which has earmarked space for a dozen or more LNG terminals along its affluent coast, received its first shipment from Australia in May, a landmark in the second-biggest energy consumer’s quest for cleaner power.But it is unlikely to secure new supply streams until the next decade after reluctance from importers put off by a sharp rise in natural gas prices allowed utilities in top consumer Japan to snap up contracts in Russia and Australia.Two giant gas discoveries in past months – in the South China Sea by CNOOC Ltd and Husky Energy Inc, and Sinopec Corp’s Puguang field in southwestern China – may provide some relief to energy planners, but will not allow it to call off the LNG hunt.“The actual demand is so big that neither onshore gas nor offshore gas or LNG will be able to meet the demand on its own. It has to be a combination of them,” said Azfar Shaukat, director of oil and gas studies at consultancy Mott MacDonald Group, now advising several gas supply projects in China.Reserves from those fields, if fully proven, would boost China’s total by nearly 18%, Reuters’ calculation show, helping Beijing’s move toward its goal of doubling its share of gas in its energy mix to 8% by 2010.CNOOC and Husky’s offshore field will need further drilling to confirm the finding, while Puguang is expected to begin pumping 4bn cu m a year in 2008.Top offshore oil and gas producer CNOOC Ltd has also committed to bring gas to the market. Its Panyu and Huizhou gas fields off the China coast, could potentially provide 42bn cu m – a third of China’s estimated total demand by 2020, he said.But with demand set to soar alongside rip-roaring growth, domestic resources can only go so far.“Right now, we see in the LNG business a kind of unprecedented situation: unprecedented demand from not only new emerging buyers China and India, but also the US,” said Steve Del Regno, Managing Director, Asia of Chevron Global Gas.China’s consumption is forecast to jump to 60bn cu m a year in 2010 from 47bn cu m in 2004, the International Energy Agency (IEA) said. By comparison, Europe’s biggest market is Britain, which consumes 100bn cu m a year.Beijing has finalised just one long-term deal, a 25-year contract with North West Shelf – owned jointly by Woodside Petroleum, BP and others – while a second one with Indonesia is caught up in last-minute haggling over price.China has approached the NWS venture for more gas from the North West Shelf, but the venture itself was looking elsewhere for customers as the project expands its capacity, said Peter Cleary, president of North West Shelf Australia LNG.“They made it known that they would like to buy more gas (from NWS) if it were available,” Cleary said from Perth.Subsidised domestic power and natural gas prices remain a serious impediment to investment, however, with oil companies such as CNOOC and Sinopec resisting Beijing’s push to provide more gas at potentially loss-making prices.Shaukat said LNG prices would level off at $8 or $9 per million British thermal units in the five to 10 years, but power plants and industrial users cannot afford to pay more than $3 to $5 per million British thermal units, unless there are subsidies. – Reuters