China Steps Up July LNG Spot Buys, Pays Record Price

BEIJING (Dow Jones Newswires), August 22, 2008

China stepped up its purchases of liquefied natural gas from the spot market in July, with three cargoes totaling over 185,000 metric tons unloaded at southern ports, data from the General Administration of Customs showed Friday.

Cargoes originated from Egypt, Nigeria and Algeria last month, bringing total spot volumes unloaded this year to 485,670 tons, the data showed.

Prices for these cargoes have also hit a record for China, averaging around $17 per million British Thermal Units from $13/mmbtu in May.

Spot purchases have been condensed into a three-month period running from May to July, after high gas prices at the beginning of the year curtailed demand.

China's return to the spot market is seasonal - due to high summer power demand, analysts said.

These purchases also reflect a change in the country's attitude toward higher-priced LNG imports as global prices have risen and supply has tightened, they said.

China wants to increase natural gas use as part of efforts to reduce its dependence on dirty fuels such as crude oil and coal, which it blames for air pollution and a worsening environment.

LNG currently meets around 2%-3% of energy requirements in the southern province of Guangdong where China's only operational LNG terminal is located.

The flagship Dapeng complex, which cost more than $3.6 billion, was commissioned in May 2006 and began commercial operations four months later.

Guangdong Dapeng LNG Co. has been supplementing long-term supplies with cargoes from the spot market. The terminal has a 25-year contract to receive LNG from Australia's North West Shelf venture.

Guangdong Dapeng LNG is a joint venture; shareholders include units of China National Offshore Oil Corp. and BP PLC, with stakes of 33% and 30%, respectively. Other partners include Shenzhen Gas Corp., Guangzhou Gas Co. and Hong Kong & China Gas Investment Ltd.

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