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Royal Dutch Shell seeks LNG distribution role in China

By Richard Fu | November 12, 2013, Tuesday | Online Edition

ROYAL Dutch Shell Plc said its proposal with China’s Guanghui Energy Co to invest in a liquefied natural gas import terminal in east China could pave the way for entering the distribution business in the future.

Xinjiang-based Guanghui said last week it signed a framework agreement with Shell on investment in the LNG terminal in Qidong, Jiangsu Province. It marks a rare potential multibillion-dollar investment between a global oil major and a private Chinese company in building a LNG terminal.

While the project still needs government approval, Huibert Vigeveno, chairman of Shell China, said it creates opportunities for Shell to jointly distribute LNG in the China market.

The Anglo-Dutch firm is already the largest LNG supplier to China among international energy majors, as part of a consortium that began supplying the super-chilled fuel to China’s first terminal in Shenzhen, Guangdong Province from Australia in 2006.

 The handling capacity of the proposed Qidong terminal would start at 600,000 tons a year, and increase to 1.15 million tons and then 3 million tons in stages, Guanghui said.

Vigeveno dismissed speculation that Shell chose Guanghui because it’s harder to approach state majors like PetroChina and CNOOC in the LNG terminal business. “We are looking at various opportunities,” he said in an interview late yesterday in Shanghai.

Shell already works with PetroChina and CNOOC in LNG, counting the Chinese companies as both partners in overseas exploration and production projects and customers in selling the fuel.

PetroChina is China’s largest gas importer but price regulation means selling imported gas in the domestic market is not profitable at the moment. The government in July announced a price reform aiming to bring prices closer to international levels but some analysts said the reform has been proceeding slower than expected, judging from PetroChina’s third-quarter earnings.

Still, Vigeveno said the Chinese government is moving in the right direction. “Looking at global supply and demand and the need for natural gas in China, I think it’s a very welcome step,” he said.

Also, Shell today opened its newly expanded lubricant blending plant in Zhapu, Zhejiang Province to meet demand from industrial customers in central China. The expansion doubled annual capacity at the Zhapu site to 400 million liters, making it Shell’s largest lubricant blending plant in China.

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