PetroChina Doubles LNG Purchases in Accord With Shell

By Winnie Zhu

Nov. 25 (Bloomberg) -- PetroChina Co., the nation's largest oil company, doubled the volume of liquefied natural gas it will buy from Royal Dutch Shell Plc in an agreement to supply terminals being built along China's eastern coast.

The companies signed a final accord for two million metric tons of supplies a year from the Gorgon project in Western Australia and Shell's global portfolio, the China unit of Europe's largest oil company said in a faxed statement today. In an initial accord signed in September 2007, Beijing-based PetroChina had agreed to buy 1 million tons of the fuel.

The Chinese oil producer is building three LNG terminals as part of a government plan to double the use of cleaner-burning fuels by 2010 to cut reliance on coal and oil. China has an accord with Woodside Petroleum Ltd., 34 percent-owned by Shell, for supplies from Australia's North West Shelf for the nation's first LNG plant in Guangdong province.

The accord signed yesterday is a ``20-year sales and purchase agreement,'' Shell said in the statement, without indicating when deliveries may start.

The cargoes will add to supplies from Shell's 30 percent- owned Qatargas 4 Project under a deal signed in April. PetroChina will receive 3 million tons of LNG from the Qatari project starting 2011, Oil Minister Abdullah bin Hamad al- Attiyah said then.

PetroChina is building an LNG receiving terminal in the eastern province of Jiangsu and another in the northeastern city of Dalian. A third plant is planned in Tangshan city in Hebei province. The Jiangsu plant is scheduled to be completed by 2011.

Gorgon Delays

Shell has a 25 percent interest in the Gorgon project. Operator Chevron Corp. owns 50 percent while Exxon Mobil Corp. has the remaining 25 percent.

The financial crisis threatens to delay the project, which has already been postponed several years, analysts have said. It was first put on hold in 1998 when the Asian economic crisis hit. More recently, the venture scrapped a timeline for approving and building the plant as the partners seek to tackle a surge in construction costs.

Gorgon requires environmental approval after the partners expanded its proposed capacity.

In September 2007, PetroChina agreed to buy between 2 million and 3 million tons of LNG for 15 to 20 years from Woodside's proposed Browse project off the northwest coast of Australia.

LNG is natural gas that has been chilled to liquid form, reducing it to one-six-hundredth of its original volume, for transportation by ship to destinations not connected by pipeline. It's turned back into gas for distribution to power plants and other buyers.

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