China's third-largest oil and gas producer - China National Offshore Oil Corp (CNOOC) - aims to consolidate and expand its LNG (liquefied natural gas) business this year, according to company sources.

"We will rev up efforts to put the Guangdong LNG programme into operation in the middle of next year, and begin the preliminary stages of the LNG programmes in Fujian and Zhejiang within the year," Fu Chengyu, president of the offshore oil giant, said on the company's website last week.

The country's top offshore oil and gas producer is targeting a 19 percent jump in oil and gas turnover in 2005, backed by a larger development budget of US$2.2 billion, an increase of 33 percent year-on-year, the company said, adding that this year's exploitation spending has been set at US$260 million.

According to Fu, 16 exploitation projects are expected to become operational between 2005 and 2006, nine of which will be completed this year, a record for the company, marking "a significant year" in CNOOC's production growth.

As a core business of the company's strategic development, the LNG field has become a focus of the offshore oil giant in order to maintain its growth momentum and sharpen its competitiveness, said insiders.

Currently, CNOOC operates four LNG projects in three coastal provinces and one municipality - Guangdong, Zhejiang, Fujian and Shanghai.

According to local media reports, CNOOC last October signed a framework agreement with the provincial government of Liaoning to build an LNG project in the province, and is in talks with Shantou in Guangdong Province and Tianjin Municipality over similar projects.

The oil company declined to comment on the status of the negotiations.

CNOOC's domestic rivals, PetroChina and Sinopec - the nation's two largest oil companies - are lobbying the central government for approval to build similar LNG projects in coastal provinces, said insiders.

"Demand for LNG is increasing in China and we expect significant growth in the coming two years," Fu told reporters in Hong Kong last month.

He said earlier that almost 40 percent of China's natural gas consumption would be satisfied by LNG imports by 2020.

The construction of LNG projects, in light of China's current situation, plays an important role in easing the country's energy shortages and optimizing its energy supply structure, and is conducive to alleviating pollution caused by heavy energy consumption, said industry experts.

The offshore oil corporation has teamed up with British petroleum giant BP to build the Guangdong LNG project for imports from Australia, which will become the country's first plant of its kind.

The US$894 million LNG terminal was designed to handle 3.7 million tons of liquefied natural gas annually during the first phase of its construction.

Imported LNG will feed a terminal where it is turned back into natural gas and transported to local power plants, public and industrial users through pipelines.

The first phase of the Fujian LNG project, with a total investment of 24 billion yuan (US$2.9 billion), is due for completion in the first half of 2007, when it will begin importing 2.6 million tons of liquefied gas every year from Indonesia.

(China Daily March 15, 2005)