LNG (LIQUIFIED NATURAL GAS)

CNOOC still wants Gorgon gas

CHINA National Offshore Oil Corp (CNOOC) is still negotiating with Chevron to secure Gorgon gas and possible equity in the LNG project, vice president Wu Zhenfang said at the opening of the China Gas Summit 2005 in Beijing this week.

CNOOC still wants Gorgon gas

“CNOOC and the Gorgon natural gas project are still in talks, and there are substantial opportunities for us to work together in the future,” the Xinhua news agency reported Wu saying.

In October 2003, CNOOC signed a preliminary agreement to buy A$30 billion of LNG from Gorgon and a 12.5% stake in the project.

But Gorgon operator Chevron said last week that CNOOC’s preliminary agreement to take a 12.5% stake in the Gorgon project had fallen through on unresolved pricing and timing issues.

LNG prices have multiplied three or four-fold since China first agreed to obtain supplies. CNOOC has had trouble accepting it must now pay significantly higher prices, but it still needs to import large amounts of LNG to supply its planned terminals across eastern China or some of these projects will have to be cancelled.

Wu has now said that as long as Gorgon still had uncommitted reserves and production capacity, CNOOC had opportunities to buy LNG from the project.

“The important thing is that both sides could deal at a proper price,” he said.

Wu acknowledged that the ‘proper price’ Gorgon price would be higher than that for gas supplied to CNOOC’s gas terminal projects in Guangdong and Fujian provinces.

“This would be in accord with market conditions,” he said.

The Gorgon project has three partners, each of which sells its own share of gas, so CNOOC could cooperate with the other two partners if it failed to reach agreement with Chevron, said Wu.

However, Shell has committed its share of Gorgon gas to North American markets, leaving only ExxonMobil, which has not yet signed any gas contracts.

CNOOC was also looking at gas supplies and equity in other LNG projects, Wu said. It would like to cooperate with any petroleum and gas companies in the world in line with market orders and economic rules, he said.

CNOOC has already signed long-term contracts to buy LNG from Indonesia and the North West Shelf project to feed its projects in Fujian and Guangdong.

The Gorgon partners are the Australian subsidiaries of Chevron (operator and 50%), Shell (25%) and Exxon (25%).

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