* Gong Jialong once ran China's largest private oil firm
* Jailed for embezzlement in 2007, his conviction was overturned
* Gong's troubles show risks for entrepreneurs in China
* Plans comeback with major gas export project in Canada
By Chen Aizhu
BEIJING, March 19 A Chinese oil tycoon, who lost his fortune after being jailed for embezzlement in 2007, aims to make his comeback with an ambitious project in Canada to export gas back to his homeland.
Gong Jialong, a truck-driver-turned-entrepreneur, ran China's largest private oil firm in the 1990s before China shook up the sector to create two state energy giants, Sinopec and China National Petroleum Corporation.
His Tianfa Group had a market capitalisation of 17 billion yuan ($2.81 billion) at its peak, but things fell apart when in 2006 Gong was arrested and later jailed for fund embezzlement and the improper disclosure of information for a listed firm.
Gong's empire was swiftly broken up and most of the business was sold to state-owned firms at a government auction.
Freed in 2008, his conviction was overturned in 2011 on appeal.
Following his release, Gong invested in two small oil and gas producers in Alberta, Canada, and has set up a firm to build a liquefied natural gas (LNG) plant in Stewart, a tiny port on British Columbia's northwest coast.
"I am fascinated by natural gas...the project we're planning is similar to what I used to be involved in," said Gong, 60, speaking in his downtown Beijing office, with resource maps of Canada hanging on the walls.
Canada Stewart Energy Group Ltd, set up with a local partner, applied to Canadian regulators on March 5 for a licence to export 30 million tonnes of gas a year, the biggest quota applied for by any firm so far.
Canada's National Energy Board has so far approved seven LNG export projects along its Pacific coast and is reviewing four others including the Stewart proposal.
It aims to start gas exports from a floating facility with an annual capacity of 5 million tonnes in 2017, before increasing to a full capacity of 30 million tonnes (4 billion cubic feet per day) by 2025, the firm said in its application posted on a government website.
SHRUGS OFF SCEPTICISM
Gong is the latest of a number of businessmen little known outside China targeting mega deals overseas.
Wang Jing, a Chinese telecoms entrepreneur, shot to prominence last year after announcing plans to build a $50 billion shipping channel in Nicaragua to rival the Panama Canal, while Chinese recycling tycoon Chen Guangbiao said in December he was looking to buy the New York Times.
Some experts questioned whether Gong's firm had the financial muscle or could secure the gas resources to get a project, estimated by Gong to cost $30 billion, off the ground.
There are already about 30 other LNG proposals in North America, some led by global players like Shell and Chevron, aiming to use a shale boom to supply Asian markets. Gas demand in China alone is set to quadruple by 2030.
A Singapore-based banker at a European lender said Gong would need to specify where the gas supplies were coming from and unless if was a major discovery few banks would finance it.
In addition, banks would require a 10-20 percent equity investment for such as massive project before they could consider loaning money, the banker said.
An executive at a private Chinese oil firm, who has known Gong for more than a decade, said the businessman was highly driven and his previous setbacks should strengthen his resolve.
"I do have my doubts, though, about his Canadian LNG project... His idea could be just to get an approval first and then slowly build it up."
Gong shrugs off sceptics, saying that the main challenge is to win over aboriginal groups in the area to work on the land.
"Once that is achieved, it should be easier to find investors to pump gas from the abundant reserves in Canada to sell them into our pipeline," said Gong, in a rare interview.
He is confident he can secure Chinese customers and said the northern port city of Tianjin, which consumes 30 million tonnes of gas a year, was a possible buyer, noting China had plenty of receiving terminals to handle the imports.
Gong, who spends half his time in Canada, said he had short-listed partners, including Chinese state-run oil majors, private firms and global companies, to invest. He did not name the firms.
RISKS FOR ENTREPRENEURS IN CHINA
In China, Gong's troubles illustrate the risks entrepreneurs face particularly in areas where they could challenge the state's dominance in key industries.
Gong worked as an oil driller and a truck driver before starting his own liquefied petroleum gas (LPG) trading firm, Tianfa in 1988 in Hubei province.
Tianfa grew rapidly to become China's largest private oil firm with nearly 200 gas kiosks when it went public in 1996.
But a restructuring of the energy sector in 1998, which saw Sinopec Corp <0386.HK > and PetroChina given control of China's fuel market, contributed to Tianfa's collapse.
"Our fuel licence was revoked overnight," Gong said, adding that Tianfa's fuel trucks were raided and its oil confiscated.
"A company that we owned for 18 years suddenly fell apart and nearly 20,000 staff were out of work. This is something unheard of in many foreign countries," he said.
($1 = 6.0527 Chinese yuan) (Additional reporting by Rod Nickel and Julie Gordon in Canada; Editing by Fayen Wong and Ed Davies)