China National Offshore Oil Corporation (CNOOC), China’s top liquefied natural gas project developer, has started construction of a new terminal in Shandong province for receiving LNG imports, writes Xu Yihe.

Located in Longkou, the terminal will cost 11 billion yuan ($1.6 billion) in the first phase of construction with an LNG import capacity of 5 million tonnes per annum, expandable to 12 million tpa in the second phase.

The facilities will include a jetty that will handle LNG vessels up to a size of 266,000 cubic metres, six storage tanks — each with capacity of 220,000 cubic metres — and an export pipeline that will link to 32 power utilities and consumption outlets.

The first phase of construction work is scheduled for completion in 2022.

A second-phase expansion programme calls for adding another 14 LNG storage tanks, also with a capacity of 220,000 cubic metres each.

The export pipelines will be connected with Shandong’s province-wide gas pipeline grids and a trans-national line linking gas fields in Russia with markets in northeastern Chinese provinces, including Shandong.

This land-based terminal marks a shift from CNOOC’s initial plan, hatched in 2011, to build an offshore terminal at Longkou with a floating storage and regasification unit.

However, CNOOC’s subsidiary, CNOOC Gas & Power, recently withdrew from the FSRU scheme for economic reasons.

The company found out that it is more costly to deploy an FSRU to import LNG than building a land-based terminal for long-term imports.

An industry official remarked: “An FSRU is an ideal solution for importing LNG during the peak demand season.”

This facility is the second LNG terminal slated for construction in Longkou.

In January this year, China’s second-largest energy company Sinopec said it would build a terminal in the city at a cost of 8 billion yuan, which will be jointly funded by Sinopec, the Longkou local municipal government, Longkou Port Authority and Hengtong Logistics.

Sinopec's Longkou terminal will be equipped with facilities able to handle LNG imports of 6 million tpa, expandable to 20 million tpa in its second phase.

Both CNOOC's and Sinopec’s terminals in Longkou are listed by the central government for priority development in the Bohai Bay region of northern China, where energy buyers traditionally rely on coal-fired power.

The government, meanwhile, has pencilled in plans to build 16 LNG jetties in seven locations on Bohai Bay, covering the cities of Beijing and Tianjin as well as Liaoning, Hebei and Shandong provinces.

The LNG terminals scheduled for construction between now and 2022 will help ease the gas supply crunch in northern Chinese cities, especially in the peak winter season when gas demand more than doubles.

The region’s gas supply is now covered by five LNG terminals with a combined design handling capacity of around 18 million tpa.

The facilities are located in Dalian in Liaoning province, Tangshan in Hebei province, and Tianjin and Qingdao in Shandong province.

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Construction gets under way in Shandong