LNG

China National Offshore Oil Corp. (CNOOC), the Chinese energy major with international and domestic LNG interests, said the first ultra-deep natural gas well in the Bohai Sea offshore northeast China had out-performed initial estimates amid ambitious domestic gas production plans.

China National Offshore Oil Corp., the Chinese energy major and with international and domestic LNG interests, has started production at its largest natural gas field in the central Bohai Sea offshore China.

Chinese liquefied natural gas imports in March 2023 rose by almost 16 percent as demand showed its most significant monthly increase in 14 months.

China National Offshore Oil Corp. has received the first liquefied natural gas cargo, delivered from Qatar, to the giant Yancheng-Binhai Port import terminal with 10 storage tanks in eastern Jiangsu Province.

China National Offshore Oil Corp. said it completed the concrete castings for the foundations of six of the world's largest LNG storage tanks being constructed for the Yancheng-Binhai Port terminal in China's eastern Jiangsu Province.

CNOOC said the six storage tanks, each with 270,000 cubic metres capacity, have been designed and developed in China.

Upon completion, each of six new storage tank will be 60 metres high and with each having a diameter of 100.6 metres and with a total casting volume of 70,860 cubic metres.

The Yancheng-Binhai terminal first phase involves the construction of 10 large-scale LNG storage tanks, including four already built and which are smaller with 220,000 cubic metres capacity.

Ren Jianxun, deputy manager of the project, was cited by CNOOC as saying that low winter temperatures presented a problem in trying to avoid cracks in the massive volumes of concrete being used.

“We decided to adjust the concrete pouring area to be symmetrical scattered by 45 degrees, thus reducing the length of construction joints, effectively preventing cracks and improving construction quality,” explained Ren.

CNOOC said that the cost of the six largest tanks was around 6 billion yuan ($950 million) and the Binhai venture would have two gas-fired power plants adjacent.

The first phase is scheduled to come on line by the end of 2023 with the 10 tanks operating.

Jiangsu's Yancheng-Binhai terminal will have an annual LNG regasification capacity of an initial 6 million tonnes per annum, though will also have the largest LNG storage base in China with the 10 tanks.

Further expansion

CNOOC has described the Binhai project as an important asset in the industrial upgrade of the Yangtze River Economic Zone.

For the next stage of the project, CNOOC said it would likely add a further 10 storage tanks, each of 270,000 cubic metres of capacity, to give an open-ended capability.

CNOOC has the largest regasification capacity of the Chinese majors with a presence in eight of the existing 22 import terminals, even after state-backed PipeChina bought and opened up several CNOOC-owned terminals to third-party access.

A second large LNG import terminal with mega-storage, the Tianjin Port Nangang project in northeast China, is also under development.

The Shanghai Oil and Gas Exchange (SHPGX) said that the Chinese major, China National Offshore Oil Corp., had agreed to buy two cargoes of liquefied natural gas from Royal Dutch Shell with offset carbon emissions, marking China’s first such gas purchase.

Royal Dutch Shell has started production at its huge Appomattox platform in the deepwater zone of the US Gulf of Mexico a few months ahead of schedule with a Chinese major as its partner in one of the few Gulf ventures to start in the past few years in the face of investment competition from onshore for LNG and pipeline gas exports.

Appomattox is the only platform start-up in the Gulf in 2019 and is expected to produce 175,000 barrels of oil equivalent a day from its position about 80 miles southeast of the Louisiana coastline.

The project is the first large-scale production from Gulf's Norphlet formation.

Appomattox is a joint venture between Shell and China National Offshore Oil Corp. Inc., a subsidiary of Beijing-based CNOOC. Shell owns 79 percent and CNOOC has a 21 percent stake.

The Appomattox venture is named after the courthouse building in the state of Virginia where Confederate General Robert E. Lee surrendered in 1865 to end the American Civil War.

Shell had made the decision to authorize and build the project back in 2015 during the most recent energy slump and Appomattox had not originally been expected to start production until the fourth quarter of 2019.

“That Appomattox was safely brought online ahead of schedule and far under budget is a testament to our ongoing commitment to drive down costs through efficiency improvements during execution,” said Andy Brown, Shell's Upstream director.

“Appomattox creates a core long-term hub for Shell in the Norphlet through which we can tie back several already discovered fields as well as future discoveries,” Brown explained.

Shell announced in 2018 the Dover discovery near the Appomattox platform and means it can be developed through connections, called tie-backs, to the Appomattox platform.

The Mattox Pipeline is also part of the project and is 90 miles (145km) in length with 300,000 barrels per day capacity that will move the produced crude oil from Appomattox westward to the Proteus pipeline system and then onshore.

The Mattox pipeline is jointly owned by Shell GoM Pipeline Company and CNOOC Petroleum Sales USA Inc.

China National Offshore Oil Corp., the largest liquefied natural gas terminal owner, is planning to open up several of its facilities to third-party access (TPA) and expressions of interest are required by the end of March in the proposal backed by the Shanghai Petroleum and Natural Gas Exchange.

The initiative by CNOOC and the Shanghai Exchange are part of a series of natural gas market reforms to back increasing demand for imports to support both economic development and the government’s clean air policies.

The Shanghai Petroleum and Natural Gas Exchange was inaugurated in November 2016 after a year-long trial operation as part of energy reforms in China.

CNOOC, owner of nine of China's 19 onshore import terminals, sold imported LNG for the first time on the exchange in April 2018 for forward delivery.

Under the Chinese TPA plans, each third-party user must take in a minimum of four cargoes, equivalent to 260,000 tonnes per annum, over 10 years.

A statement by the Shanghai exchange said that this requirement may be increased in multiples of four cargoes.

“The long-term TPA could be granted to more than one company, while there were no firm rules yet on the amount,” according to the statement.

Analysts said that while the initiative opens the way to allow more independent buyers to enter the market, there was concern about having to lock in third-party customers in terms of price and volumes for a 10-year term.

Expressions of interest have to be submitted by March 31. The exchange said subsequent negotiations would then take place in April and May on pricing and delivery details.

During a trial for the process held in 2018 by CNOOC and the exchange, TPA was offered at the Yuedong LNG terminal in the southern province of Guangdong at the end of October and at the Ningbo facility in the eastern Zhejiang province in November.

The Chinese proposal is a move towards the policies of the European Union requiring member states to provide open access to gas infrastructure, including LNG terminals.

The conditions and tariffs of TPA to regulated LNG terminals in Europe must be published by terminal operators as well as approved by the national regulator.

However, in the Europe market exemptions to the regulated TPA regime have been granted to six major operating terminals: three in the UK, the Isle of Grain, Dragon LNG and South Hook facility, one in France at Dunkirk LNG, one in Italy at the Adriatic terminal and one in the Netherlands at Gate LNG in Rotterdam.

Anadarko Petroleum Corp. of the US said the joint venture partners developing the onshore LNG export project with feed-gas assets from the Rovuma Basin in Mozambique have signed a Sale and Purchase Agreement with the Chinese major, China National Offshore Oil Corp.

A second large-scale LNG import project has been proposed for the Philippines with the Chinese major, China National Offshore Oil Corp., named as one of the partners in the facility to be located south of the capital Manila.