UPDATE 3-Malaysia's Petronas sells stake in Canada gas project to Sinopec

Wed Apr 30, 2014 3:42am EDT

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(Adds China utility firm Huadian's alliance with Sinopec; analyst comment)

KUALA LUMPUR/VANCOUVER, April 30 (Reuters) - A plan by Malaysian state-owned oil firm Petronas 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 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 tonnes 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 , later said state-owned power group China Huadian Corp 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.

In addition to its ownership offtake, Sinopec will buy another 3 million tonnes of LNG annually from the terminal, to be located in the small port of Prince Rupert, British Columbia, which is about 1,500 kilometers (932 miles) by road north of Vancouver.

Petronas did not give a value for the Sinopec deal.

Petronas is expected to make a final decision on giving the project the green light by yearend. It says construction will take about four years, with commercial operation expected in early 2019.

Sinopec is Petronas's fourth partner in the project, which is one of about a dozen LNG terminals proposed for British Columbia's rugged coastline as energy companies scramble to build facilities to export cheap Canadian gas to Asian markets.

Petronas, which entered the fray in 2012 with its C$5.2 billion ($4.7 billion) takeover of Canada's Progress Energy Resources, has moved quickly to hurdle past its rivals in the LNG race. The company has so far secured an export permit and filed its key environmental documents.

Once the deal closes, Sinopec will be the second biggest shareholder in the project behind Petronas, which holds 62 percent. Indian Oil Corp Ltd and JAPEX Montney Ltd each have 10 percent stakes, while Petroleum Brunei holds 3 percent.

The Sinopec deal is subject to approval by the relevant Chinese authorities.

Bank of America Merrill Lynch served as financial adviser to Petronas.

($1=$1.10 Canadian) (Reporting by Al-Zaquan Amer Hamzah in Kuala Lumpur and Julie Gordon in Vancouver; additional reporting by Chen Aizhu in Beijing and Charlie Zhu in Hong Kong; Editing by Jason Neely and Peter Galloway and Miral Fahmy)

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