Chinese and Kazakh firms plan LNG plant in Xinjiang

BEIJING Dec 23 (Reuters) - China's Xinjiang Guanghui Stone Corp (600256.SS) has signed a framework deal with Kazakhstan's Tarbagatay Munay (TBM) to develop and sell natural gas and crude oil, including liquefied natural gas, Guanghui said on Tuesday.

Under the agreement, Guanghui will set up a LNG plant with annual processing capacity of 500 to 800 million cubic metres in the Altai region in China's northwestern Xinjiang region.

Normally LNG plants are built in coastal areas to enable the super-cooled fuel to be traded around the world, transported in specialised ships. But Xinjiang is thousands of miles from the sea.

An executive at Guanghui told Reuters the Xinjiang plant would rely on a fleet of trucks to distribute the Kazakh gas in the Chinese region, after processing in the LNG plant.

The Chinese company will give TBM a 10 percent stake of the new plant at no cost and grant it the right to buy a 14.9 percent share at $37.5 million in the next three years.

In return, Guanghui can purchase 49 percent of TBM's operating permits for crude and natural gas for $40 million. It will also invest $60 million and $150 million, respectively, to explore TBM's natural gas and crude assets.

All natural gas produced in the joint venture should be sold to the new LNG plant, priced at $120 to $160 per 1,000 cubic metres in the first five years of startup, or international gas prices, whichever is lower.

After five years, the gas will be priced on the international market.

The statement did not give the amount of natural gas and crude assets owned by TBM but said it would be announced after a further period of assessment.

The two sides will seek government approval before negotiating on a final agreement, which should be agreed by March 2009. (Reporting by Beijing newsroom; Editing by Ben Tan)