Zhuhai Zhenrong, one of four government-backed crude oil importers in China, has agreed to buy more than 110 million tons of liquefied natural gas (LNG) from Iran over 25 years, which could be the largest LNG purchase deal in the world.
The company signed a framework agreement earlier this month to buy 2.5 million tons of LNG annually from Iran starting in 2008, the company day announced in a statement posted on the website of the State Assets Supervision and Administration Commission.
The imports are expected to increase to 5 million tons a year starting in 2013. The contract is drawn up for 25 years, it said.
The deal, worth more than an estimated US$20 billion, reflects China's growing appetite to secure enough energy from overseas to fuel its economic boom.
As part of the deal, Zhuhai Zhenrong may be allowed to buy stakes in Iranian oil and gas fields.
The company signed a memorandum of understanding with the Iranian Ministry of Petroleum in December to undertake development and production in three Iranian oilfields, along with an intention for cooperation in marketing Iranian LNG. Each of the fields has an average production capacity of 15 million tons a year.
Iran is the second-largest oil exporter to China after Saudi Arabia.
Zhuhai Zhenrong said the National Iranian Gas Export Company has invited firms to construct the LNG production facilities which are expected to be operational in 2008.
The Chinese company did not say where it will build the LNG receiving terminal, which will transform the LNG imports to supply the domestic market. The company said it is contacting potential buyers to market the gas.
Chinese oil companies are rushing into the burgeoning LNG business betting on a considerable increase in consumption of clean fuel in energy-starved coastal areas.
On Tuesday, China National Offshore Oil Corp signed an agreement to build a US$1.7 billion LNG receiving terminal in East China's Zhejiang Province which could handle 3 million tons of LNG imports a year.
It will be the third such terminal in China.
(China Daily March 18, 2004)