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Gas supply steady, despite cold
By Chen Yongrong and An Bei |
January 8, 2010, Friday
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CHINA will not face a natural gas shortage despite an expired US$40 billion LNG deal between its largest oil and gas producer and Woodside Petroleum, Australia's second biggest.
China National Petroleum Corporation (CNPC) announced on Tuesday that the initial accord between its listed arm, PetroChina, and Woodside, which was signed in 2007, is no longer valid due to project delay.
Woodside made the same announcement on its official Website on Monday, indicating the deal was supposed to create a potential sale of 2 to 3 million tons a year of liquefied natural gas (LNG) from its Browse LNG Development to PetroChina.
The deal was estimated to worth up to over US$40 billion, as the LNG supply was supposed to start between 2013 to 2015 for 15 to 20 years, according to the expired accord.
The deal expiration had given rise to market worries over the increasing possibility of natural gas shortage in future, as China had been grappling with shortages of natural gas since late 2009 triggered by the extraordinarily freezing winter weather.
However, Liu Xiaoli, deputy director of the Center for Energy Research Institute of the National Development and Reform Commission (NDRC), said there is no need to over-worry.
"The deal expiration is largely a commercial practice, as failing to reach an agreement after the initial accord is very common in business," she said.
The two parties did not reach an agreement to extend the deal since "the Browse LNG Development is postponed, and Woodside would not be able to provide the supply by the time agreed in the previous accord," said CNPC in a statement on its Website.
The statement did not elaborate on the reason of the project delay, but Australian local media said it was because Woodside and its partners would not give a final investment decision on Browse Development until 2012, pushing the beginning of the proposed gas export to years after that.
Liu Yijun, a professor with the China University of Petroleum, said an estimation that the future global market will face an oversupply of natural gas was one of the reasons that had made Australian investors "cautious and prudent."
The expired deal would have limited impact on China's domestic gas supply as the supply from Woodside is not crucial. According to Liu Yijun, a supply of 2 to 3 million tons LNG would bring China 4 billion cubic meters of natural gas each year, accounting for only 4.5 percent of China's estimated annual consumption of 90 billion cubic meters in 2009.
China's structure of natural gas supply is witnessing improvements with rising domestic production and imports from Central Asia, Myanmar and Russia. China's natural gas output in 2008 was 76.1 billion cubic meters, as compared with its consumption of 80.7 billion cubic meters in the same period.
(The authors are Xinhua writers. Shanghai Daily condensed the article.)
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