Randomly Noted

You’ve read about China’s scramble to secure natural resources to feed its growing (yes, still growing) economy. Today comes a landmark deal between U.K. and Chinese companies involving something coal seam gas. Actually, it’s about coal seam gas and liquified natural gas: CSG-to-LNG. The landmark news is this is the first time anyone building a big LNG project fed by CSG has signed up a specific export customer. As DJN’s Ross Kelly reports, “there are three separate corporate entities racing each other to be the first to pull it off, all at the port town of Gladstone in Queensland state,” in Australia. There’s big money involved – no surprise – and also geopolitical energy implications. To wit: crude oil is a scarce resource controlled by OPEC and a few others. Additional energy sources are therefore highly coveted, especially by those whose appetite for energy is increasing by the day.So, here are some details about today’s landmark news: In the mad Australian CSG-LNG dash, China National Offshore Oil Corp. has now agreed to buy 3.6 million metric tons a year of LNG from the Australia arm of U.K.’s BG Group. CNOOC also will buy 5% of BG’s interest in coal seam gas facilities in Australia. There are other bits and pieces to the deal; the companies aren’t disclosing any deal price. The timing of the pact is interesting because demand for LNG has fallen along with most other sources of energy. A slowing world economy means less energy consumption. Also of interest: A regional (Asia-wide) scramble to develop LNG supplies could create a glut and drive down prices. But Kelly writes that “The BG deal shows that China is still keen to fill projected long-term gaps in its energy supply and that LNG plants sourced from CSG can compete for customers with traditional LNG plants.”

A useful website from the Queensland government on coal seam gas and similar: http://www.dip.qld.gov.au/fact-sheets/coal-seam-gas-fact-sheet.html

DJN’s David Winning and Jing Yang separately report on an intriguing wrinkle in the broader China-LNG story: Beijing is insisting on favorable shipping-related terms in Chinese LNG deals with Western companies. As they write in a “China Energy Watch” column: “…(T)he lure of gaining exposure to China’s fast-growing energy sector is prompting some Western companies to give up a measure of control over shipping…” The BG-Cnooc deal is no exception. The companies will create a consortium to build two LNG ships in China. Winning and Yang write: ”China wants to buoy its shipping sector, which is being battered by the global financial crisis.” The LNG glut gives Beijing leverage to insist on favorable shipping side-deals it didn’t have when supplies were scant.In other China-Australia energy news, and I promise this is it for the day, a story by DJN’s Elisabeth Behrmann says “China’s coking coal imports are likely to double to around 13 million metric tons this year, potentially a positive long-term development for coal miners in Australia, as China so far has been an insignificant importer of the commodity. “