2010-09-11 09:46

Qingdao - The nation's largest refiner Sinopec Corp commenced work on a 9.66-billlion-yuan ($1.42 billion) liquefied natural gas (LNG) project in Shandong province on Friday, as part of efforts to expand its gas portfolio in the fast-growing domestic market.

The Qingdao unit is Sinopec's first LNG project in China. It is designed to receive 3 million tons of LNG and supply 4 billion cubic meters of gas every year.

The project will receive LNG from US oil major ExxonMobil's project in Papua New Guinea. Sinopec has signed long-term contract to buy 2 million tons of LNG from the project annually.

Sinopec expects to start operating the Qingdao plant by November 2013. It is also considering a second phase for the project at a later date.

The project will improve the energy structure in Shandong, said Wang Zhigang, senior vice-president of Sinopec Corp. The province, which became China's largest energy consuming province in 2005, is now mainly relying on coal and oil to fuel its economy.

At present, natural gas accounts for around 1 percent of energy use in Shandong. Gas consumption is expected to reach 9 billion cu m in Shandong by 2013, according to Sinopec.

Analysts said the LNG project marks a milestone in Sinopec's expansion in the domestic LNG market. At present, the market is dominated by oil and gas producer, PetroChina and offshore oil company Cnooc.

This LNG project is in line with Sinopec's efforts to accelerate the development of its gas business. The company will speed up gas exploration and production, pipeline network construction, and market building.

The company's natural gas production is expected to exceed 10 billion cu m by the end of this year. Its gas pipeline network will also reach 6,500 kilometers by the time, according to the company.

Sinopec officially started operating a 62.7-billion-yuan pipeline linking the Puguang natural gas field in Sichuan province with Shanghai.