Oil & Gas

06 Sep 2021

China’s Zhenhua Oil Seeks Tie-up with Local Firm for First Gas Terminal

06 Sep 2021  by Reuters   

China’s Zhenhua Oil is in advanced discussions to join a provincial government-backed firm to build a natural gas receiving terminal in east China, the first import facility the state-run trader will own a stake in.

Zhenhua Oil is one of the niche gas importers expected to lead the next wave of terminal expansions along with companies like privately-run ENN Group and piped gas distributor Guangzhou Gas as China boosts use of the lower-carbon fuel to replace coal.

A unit of state defense giant Norinco Group, Zhenhua is finalising a joint venture with Jiangsu Guoxin Investment Group, a firm backed by provincial government that owns gas pipelines, for the terminal investment, said the sources.

Jiangsu was China’s top gas consuming province in 2020 with 30.7 billion cubic meters used, just under 10% of China’s total.

The sources declined to be named as the matter is not public.

“The (proposed) JV marries the strength of Guoxin as a provincial pipeline operator in a top gas consuming region and Zhenhua as an experienced trader with oil and gas assets globally,” said one of sources who has direct knowledge of the matter.

Guoxin is expected to take 61% stake in the proposed venture, Zhenhua 34%, and port authorities of Yangkou the remaining 5%, said the source.

Zhenhua did not immediately respond to a request for comment. Guoxin’s LNG subsidiary did not respond to an email seeking comment.

Under phase one of the investment estimated at over 6 billion yuan ($928.84 million), the partners will build three 200,000 cubic meter tanks with annual handling capacity of 3 million tonnes, said the sources.

Construction began in June at the man-made island of Yangguangdao in Rudong county, and is slated for completion by the end of 2023, the sources added.

The smallest among China’s state-run oil and companies producing oil and gas in Abu Dhabi, Egypt and Kazakhstan, Zhenhua set up its LNG department in mid-2018 and has since been an active spot trader of the super-chilled gas.

It’s one of the earliest traders that won auctions to use gas terminals operated by state oil and gas major CNOOC, and has doubled its LNG turnover since 2019 to reach over 1.5 million tonnes this year.

Jiangsu currently has only two LNG terminals able to handle 9.5 million tonnes of LNG imports a year, half the capacity of south China’s Guangdong, the second-largest gas consumer.

More News