Malaysia's Petronas sells stake in Canada gas project to Sinopec

Wed Apr 30, 2014 3:49am EDT
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KUALA LUMPUR/VANCOUVER (Reuters) - A plan by Malaysian state-owned oil firm Petronas PETR.UL to build an $11 billion liquefied natural gas (LNG) export terminal on Canada's Pacific Coast gained momentum on Tuesday with China's Sinopec Group SASADZ.UL and a Chinese state utility joining the project.

Petronas said it will sell state-owned Sinopec Group, formally known as China Petrochemical Corp, a 15 percent stake in its Pacific NorthWest LNG export facility, along with a 15 percent stake in the northern British Columbia shale gas assets that will feed it.

As part of the deal, Sinopec, China's largest petrochemical producer, will take 1.8 million metric tons (1 metric ton = 1.1023 tons) of LNG a year, or about 15 percent of the proposed LNG facility's production, for at least 20 years, Petronas said in a statement.

Sinopec Group, parent of Hong Kong and Shanghai-listed top Asian refiner Sinopec Corp (0386.HK: Quote) (600028.SS: Quote) (SNP.N: Quote), later said state-owned power group China Huadian Corp CNHUA.UL will share its stake in Pacific NorthWest, taking 5 percent, with Sinopec Group retaining the rest.

The utility will also share the gas offtake by taking 0.6 million tpy and Sinopec keeps the remainder 1.2 million tpy.

Huadian is the first Chinese power company to invest in a North American shale gas project. Analysts expect more Chinese utilities to make similar investments as environmental concerns intensify their need for cleaner-burning natural gas.

Huadian is currently the only utility firm drilling for shale gas in China.

"Among the Chinese state utilities, Huadian is the one with the most distinctive natural gas strategy. It wants to be a leader in the gas-for-power sector," said Li Yao, executive director of Beijing-based consultancy SIA Energy.

China is moving to double the share of natural gas in its overall energy supply to more than 8 percent by 2015 to reduce its reliance on coal that fuels most of its power plants.   Continued...

A Sinopec logo is displayed at one of its gas stations in Hong Kong March 26, 2010. REUTERS/Bobby Yip