CHINA BUYS STAKE

One of China's largest power producers is buying a stake in a liquefied-natural-gas project on Canada's West Coast, in a rare move that illustrates the pressures faced by Chinese electricity companies to diversify away from coal and toward cleaner-burning fuels.

China Huadian Corp., one of China's five largest state-owned electricity producers, is purchasing a 5% stake in Pacific Northwest LNG, an export terminal being built on an undeveloped island in northern British Columbia. The project is owned by Malaysia's state oil and natural-gas company Petroliam Nasional Bhd., or Petronas, which acquired it in 2012 as part of its 5.5 billion Canadian dollar (US$5 billion) purchase of Canada's Progress Energy Resources Corp.

Financial terms weren't disclosed.

Huadian purchased the stake from China Petrochemical Corp., or Sinopec, according to a Sinopec representative. On Tuesday Sinopec said it purchased a 15% stake in the project, but on Wednesday said it sold a 5% stake to Huadian.

The terminal could begin operating as soon as 2018 and will have the capacity to export 12 million metric tons of LNG a year, Petronas has said.

Under the terms of the deal, Sinopec will import 1.2 million tons of LNG a year, while Huadian will import 600,000 tons a year. Sinopec said Tuesday that it signed a separate agreement to import an additional three million tons of LNG a year from Pacific Northwest LNG for 20 years.

The deal comes as China looks to double the share of natural gas in its energy mix to 10% by 2020 from less than 5% now. Although China has ambitious plans for unconventional fuels such as shale gas, large-scale production is at least a decade away, creating opportunities for importers of LNG—the chilled and exportable form of natural gas. Chinese companies are under increasing public pressure to switch to cleaner-burning fuels as worries rise over the country's massive pollution problems.

Huadian is planning to build a 24 billion yuan ($3.84 billion) LNG terminal in the coastal city of Taizhou with the ability to receive 12 million tons a year.

Petronas has been selling stakes in Pacific Northwest LNG to raise funds for its development, which could cost as much as C$11 billion. The Malaysian energy company already has sold 10% stakes to Japan Petroleum Exploration Co. and Indian Oil Corp.  and will supply them each with 1.2 million metric tons of LNG annually from the project. Petronas also has sold a 3% stake to Brunei National Petroleum Co. in exchange for 3% of Pacific Northwest LNG's annual output.

China has yet to begin importing LNG from Canada. Chinese energy companies are planning to diversify their LNG supplies, which for now come from only a handful of suppliers that include Qatar, Australia, Malaysia and Indonesia.

wsj.com