PetroChina gets Russia LNG OK

PetroChina, the country's largest oil and gas producer by output, has received approval from the Russian government to acquire a 20 percent stake in the country's Yamal liquefied natural gas (LNG) project, the Xinhua News Agency reported Thursday.

Russian Prime Minister -Dmitry Medvedev said at a conference Wednesday that total investment in the Yamal LNG project will top $28.1 billion and the project will also involve infrastructure such as building ports, according to the Xinhua report.

Russia's largest independent gas producer Novatek owns 80 percent of the Yamal project at present, and the other 20 percent is owned by French energy producer Total.

The company could not be reached by press time.

Wang Ruiqi, an industry analyst at ICIS C1 Energy, told the Global Times that China imports a very small amount of LNG from Russia at present and more overseas natural gas supply would surely help ease the natural gas demand burden in China.

PetroChina has sped up the acquisition of overseas natural gas assets in order to meet the world's second-largest oil consumer's growing appetite for the cleaner energy. On late Wednesday, PetroChina announced that it had acquired oil and gas assets from Brazilian energy producer Petrobrasa in Peru.

China is currently experiencing a serious shortage in natural gas supply. The country is expected to need at least 192 billion cubic meters of natural gas this year, but total supply is no more than 170 billion cubic meters, an official from the National Development and Reform Commission said last month.

"China's reliance on imported gas is expected to reach 31 percent in 2013, and the demand will rise rapidly in the next few years - reliance on imported gas may exceed 52 percent by 2018," Wang noted.

The Yamal project is expected to start operation by around 2015 or 2016, and annual capacity will reach 15 million tons of LNG by 2018, said a Reuters report in June.

According to an agreement signed in September, China National Petroleum Corp, the parent company of PetroChina, will purchase at least 3 million tons of LNG per year from the Yamal project for a period of 15 years.

Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University, told the Global Times that compared with the Middle East and Africa, Russia is a safer and a more convenient channel for China to get the much-needed energy.

"In the long run, Russia presents the largest opportunity for China in terms of overseas energy cooperation, given the country's stable political environment as well as its location advantage [of being close to China]," Lin noted.

Lin said that previous energy tie-up between China and Russia mainly consisted of direct energy purchases, but the Yamal deal allows P-etroChina to directly invest in the LNG project, which indicates deeper cooperation in the energy sector.

China and Russia have inked -major energy deals after President Xi Jinping paid a visit to Russia in March this year.

"Russia also needs to further explore the Chinese market, as demand in its traditional energy partner - the European Union is cooling," Lin said.