Life of Guangzhou - Guangdong Plant Halts Spot LNG Purchases for Second Month

Guangdong Dapeng LNG Corp., one of China's two liquefied natural gas terminals, will halt purchases of spot cargoes for a second month in November as demand falls in the nation's biggest manufacturing province.

Consumption has declined as electricity use dropped after factories shut, said a Chinese official with knowledge of monthly purchases, who asked not to be identified because import transactions are confidential.

The $900 million LNG import terminal, a venture between China National Offshore Oil Corp. and BP Plc, provides the fuel to power producers in southern Guangdong province. Half of China's toymakers shut in the first seven months, according to Xinhua News Agency, while the nation's manufacturing in October contracted by a record as exports declined.

``The terminal may not need to buy any spot cargoes in the short term as demand will remain low in winter,'' Kevin Zhuang, an analyst with Guangdong Oil and Gas Association, said by telephone in the southern province today.

LNG prices are also higher than liquefied petroleum gas, making it expensive for power generation, Zhuang said. LPG prices have fallen about 43 percent from a record reached in the summer to about 4,000 yuan ($586) a metric ton, Zhuang said. China bought a spot LNG cargo at $20.43 per million British thermal units, or 7,252 yuan a ton, in October, according to customs data.

Power Output

China's power production fell 4 percent last year, the first decline since March 2005, after the nation's third- quarter gross domestic product expanded at the slowest pace in five years. Energy demand will continue falling in the short term, Han Wenke, the head of energy research at the National Development and Reform Commission, the country's economic planner, said yesterday.

The nation's first LNG import terminal buys spot cargoes to supplement contractual supply from Australia. China aims to double the use of the cleaner-burning fuel by 2010 to cut pollution.

A spot LNG cargo typically weighs between 55,000 and 60,000 metric tons. LNG is natural gas chilled to liquid form, reducing it to one-six-hundredth of its original volume at minus 161 degrees Celsius (minus 258 degrees Fahrenheit) for transportation by ships to destinations not connected by pipeline.

(By Winnie Zhu)

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