Hong Kong Power Companies Sign LNG Deals with Shell

Source Reuters
Company Royal Dutch ShellChina Southern Power Grid Co., Ltd.CLP GroupHong Kong Electric Company LimitedMitsui OSK Lines Ltd 
Tags Service Contracts, Oil & Gas Trading, LNG & Gas Storage/Processing
Date June 21, 2019

(Reuters) Hong Kong Electric Co and and Castle Peak Power Company said on Friday they have signed a supply deal for Hong Kong’s first import of liquefied natural gas (LNG) and for the lease of an import vessel.

Hong Kong is undertaking a massive shift to use more natural gas to fuel its electric power generation from coal, potentially creating a steady and lucrative demand source in the Asian LNG market.

Both Hong Kong-based power companies said they have signed an agreement with Shell Eastern Trading - a subsidiary of Royal Dutch Shell - for a long-term LNG supply for the Hong Kong Offshore LNG terminal.

Shell will supply LNG to both companies from its global LNG portfolio once the project has been completed.

They did not specify the supply deal details, but Reuters had first reported the impending deal in March last year citing sources familiar with the matter as saying the supply deal is for 1.2 million tonnes per annum (mtpa) for 10 years starting after 2020.

Castle Peak Power Company and Hong Kong Electric Co said in a separate statement that their joint venture has signed an agreement with Mitsui O.S.K. Lines Ltd (MOL) for the hire of a floating storage and regasification unit (FSRU) on a time-charter basis for the LNG project.

They added that the FSRU vessel will be used for receiving, storing, and regasifying LNG for the supply of natural gas to CAPCO and HK Electric for power generation through two separate subsea gas pipelines.

MOL will also be responsible for providing operations and maintenance services for the FSRU vessel and offshore LNG terminal.

Castle Peak Power Company Ltd (CAPCO) is a joint venture of utility CLP Power Hong Kong Limited and China Southern Power Grid International (HK) Co, which is a wholly owned subsidiary of China Southern Power Grid Co Ltd.

CAPCO owns three power stations - Castle Peak Power Station, Black Point Power Station and Penny’s Bay Power Station - which are operated by CLP Power.

As part of its commitment to the Paris Climate Change Agreement, Hong Kong is keen to spike the use of natural gas in its total fuel mix for power generation to about 50% by 2020 from 22%, as of 2012.

“The FSRU vessel, together with the jetty and submarine pipelines, will enable us to have access to diverse gas sources for cost-competitive LNG supplies,” HK Electric Managing Director Mr Wan Chi-tin said in the statement.

Source: EvaluateEnergy® ©2019 EvaluateEnergy Ltd