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Global LNG Producers Vie for China Bid
International liquefied natural gas (LNG) producers have escalated their bidding campaign for a US$10-billion gas supply contract for China's first LNG project, promising that they would offer equities in their gas fields to Chinese companies, according to Bussiness Weakly.
"If China National Offshore Corp (CNOOC) wants to get equity participation (in our fields), it could do so," said Purnomo Yusgiantoro, Indonesian minister of energy and mineral resources.
The minister made the remarks a few days ago during his visit to China to lobby the Chinese Government to award the lucrative contract to the Indonesian Tangguh LNG, a 50-50 project owned by Pertamina (Indonesian State Oil & Gas Mining Company) and BP.
The minister's visit came at a time when the Chinese Government is about to invite foreign partners to bid for a LNG supply contract of 20-25 years for its first LNG receiving terminal in Shenzhen, a boom city in South China's Guangdong Province.
The deal is believed to be worth at least US$10 billion as China plans to import 3 million tons of LNG a year by 2005 for the terminal which will turn imported LNG back into gas to supply the province. An additional 2 million tons would be imported by 2008.
Earlier in March, BP beat international rivals including Royal Dutch/Shell Group and Exxon Mobile to take a 30 per cent equity in constructing the US$600 million LNG terminal. CNOOC, with 33 per cent, holds the controlling stake.
Indonesia's bidding has to face challenges from Australian LNG (ALNG), whose top officials said they were also ready to offer equities in their fields as part of the deal.
"We would completely comply with the Chinese Government. We'd like to co-operate in every aspect at an appropriate time, including allowing CNOOC to take up some equities," said Alf D'Souza, vice-president of ALNG.
"We have been involved in the project since 1997. We are prepared to follow whatever Chinese Government's rules. We do not expect to fail," D'Souza added.
ALNG's LNG projects in Western Australia's North West Shelf is expected to be the centrepiece of the company's bid.
Both the Indonesian and Australian companies said they had not yet decided what size stake CNOOC would be allowed in their gas fields.
Apart from the above two, bidders also involve Middle Eastern countries such as Qatar.
But analysts said the odds for the Middle Eastern firms are slim, because, compared with Pertamina and ALNG, Middle Eastern nations offer no advantage in price, supply experience and shipment.
The only, if any, advantage for Middle Eastern firms is that they are important crude oil suppliers to China, which may give them some bargaining power, analysts said.
An official from CNOOC said BP's success in the terminal construction has added weight to both companies, because BP is the operator of the Indonesia's Tangguh project and has one-sixth equity in ALNG, along with Royal Dutch/Shell Group, Chevron Corp and others.
"The terminal itself is not attractive. The key for the project is the long-term supply contract," said the official, indicating that BP is expected to have a strong say in selecting the supplier.
According to the official, BP has not yet been involved in the selection.
The Indonesian minister agreed with the official, saying, "the pick-up of BP is a good start for Pertamina to get a step towards the LNG business in China."
ALNG president Arthur Dixon said in March that they were always hopeful after BP's success, and he thought it "strengthens a very strong position that ALNG already has in China."
An official from BP said it was possible for the Chinese Government to buy gas from both companies, for both economic and political reasons.
"As far as I can understand, the project is very likely to be shared by several players for," the official said.
D'Souza said "If they (the Chinese Government) decide to ask us to co-operate with others, we would do so," while the Indonesian minister said the issue would be discussed in their negotiations with Chinese partners.
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