China's Guangdong Plant May Halt LNG Spot Purchases This Month

By Winnie Zhu

Aug. 4 (Bloomberg) -- Guangdong Dapeng LNG Corp., the operator of one of China's two liquefied natural gas terminals, may halt purchases of LNG cargoes from the global spot market this month because of rising costs, a Chinese official said.

The company hasn't secured any spot cargoes for August, said the official with knowledge of monthly purchases, who asked not to be identified because import transactions are confidential. Guangdong Dapeng normally orders spot cargoes one month before the delivery date, the official said.

The $900 million LNG import terminal, a venture between China National Offshore Oil Corp. and BP Plc, is buying cargoes to supplement contracted supplies from Australia. Guangdong Dapeng paid a record $14.35 per million British thermal units for a cargo from Nigeria in June, four times more than the Australian imports, customs figures showed on July 22.

``LNG prices keep rising in the Asia Pacific region, making it harder for Chinese companies to buy individual cargoes, Kevin Zhuang, a gas analyst with Guangdong Oil and Gas Association, said by telephone from the southern province today. ``The halt in purchases may also be attributed to increased imports in July.''

Guangdong Dapeng bought three spot cargoes last month, bringing this year's total overseas shipment to seven.

Current LNG prices are too high and the Guangdong provincial government doesn't provide enough subsidies for local power plants to use the more costly cleaner fuel, the Chinese official said.

China, the world's second-biggest energy user, subsidizes purchases of LNG, part of a government target to double the use of the fuel by 2010 and cut pollution.

A spot LNG cargo typically weighs between 55,000 and 60,000 metric tons. LNG is natural gas chilled to liquid form, reducing it to one-six-hundredth of its original volume at minus 161 degrees Celsius (minus 258 degrees Fahrenheit) for transportation by ships to destinations not connected by pipeline.

To contact the reporters on this story: Winnie Zhu in Shanghai at wzhu4@bloomberg.net.