Sinopec, Petronas eye Canada’s LNG project

The Sinopec logo is displayed at one of the company’s gas stations in Hong Kong. The Chinese firm is in talks with Petronas to buy 15% of the Canada’s LNG project.

Dow Jones

Beijing

China Petroleum & Chemical Corp (Sinopec)  is in talks with Malaysia’s Petroliam Nasional Bhd to buy up to 15% of a liquefied natural gas project on Canada’s western coast, people familiar with the matter said.

The Pacific Northwest LNG project is an export terminal planned for an undeveloped island in northern British Columbia, which was acquired by Petronas in 2012 as part of its C$5.5bn (US$4.9bn) purchase of Canada’s Progress Energy Resources Corp. The terminal could begin operating as soon as 2018 and will have the capacity to export 12mn metric tonnes of LNG a year.

Petronas has been selling stakes in Pacific Northwest LNG’s reserves and output to raise funds for its development, which could cost as much as C$11bn. The company has sold 10% stakes to Japan Petroleum Exploration Co and Indian Oil Corp and will supply them each with 1.2mn metric tonnes of LNG annually from the project. Petronas also has sold a 3% stake to Brunei National Petroleum Co in exchange for 3% of Pacific Northwest LNG’s annual output.

Petronas has said it would announce the sale of another 15% stake to an Asian buyer by the end of this month but hasn’t disclosed the company. The value of the stake couldn’t be determined.

The talks between Petronas and the Chinese company, or Sinopec, come as China looks to double the share of natural gas in its energy mix to 10% by 2020. The negotiations were first reported by Reuters news service. Although China has plans to use unconventional fuels such as shale gas, large-scale production is at least a decade away, creating opportunities for importers of LNG-a chilled form of natural gas that can be shipped.

China has yet to begin importing LNG from Canada, but Chinese energy companies are planning to diversify their LNG supplies, which for now come from only a handful of countries, such as Qatar, Australia, Malaysia and Indonesia.

The Canadian subsidiary of China’s primary offshore energy producer, Cnooc, last year was awarded exclusive rights to proceed with a terminal to export LNG from Canada’s Pacific coast. PetroChina, China’s largest energy producer, is part of a consortium led by Royal Dutch Shell to develop another Canadian LNG project.

Canada is trying to transform its underdeveloped northern Pacific coast into a hub for LNG by using a glut of natural gas from untapped reserves inland. The Canadian government also has been trying to shift gas exports away from the saturated US market and into LNG-hungry Asian markets such as China, South Korea and Japan.

If a deal between Sinopec and Petronas is reached, it would be the Chinese company’s first entry into a Canadian LNG project.