SK E&S Takes 10pc Stake in Zhoushan LNG Terminal

Source Press
Company SK Holdings, ENN Energy Holdings Ltd.
Tags Country: China, M&A: Asset Deal, Deals, Segment: LNG
Date August 05, 2020

(argusmedia.com) Chinese private-sector company ENN has sold a 10pc stake in its wholly owned 3mn t/yr Zhoushan LNG receiving terminal in east China's Zhejiang province to SK E&S, providing the South Korean upstream firm with LNG import and storage access and the opportunity to expand its footprint in China's downstream gas market.

The deal follows the signing of a binding contract between SK E&S and ENN in late April. The firms did not disclose the value of the transaction. ENN expects the Zhoushan partnership to lead to further cooperation between the two sides in broader and more diverse fields, without elaborating.

ENN estimates the capital expenditure for the terminal at 7.7bn yuan ($1.1bn) for phase one and another Yn2.2bn for phase-two construction.

SK E&S' stake purchase builds on recent investments in three Beijing Gas subsidiaries. It bought a 30pc stake each in Ningbo Beilun Bochen Energy Trading, Huzhou Bochen Natural Gas and Zhejiang Boxin Energy in early July. These firms are involved in LNG and pipeline gas distribution in Zhejiang. Zhejiang Boxin Energy secures LNG from state-controlled importer CNOOC's 3mn t/yr Ningbo LNG receiving terminal in Zhejiang.

The South Korean firm's stake purchase will also lead to higher utilisation rates at Zhoushan, which is currently under expansion. Construction to expand the terminal's capacity by an additional 2mn t/yr began at the end of 2018, and ENN is targeting to start operations at the expanded facilities in 2021.

Zhoushan has been underused since ENN brought it on line in 2018 because of a lack of connectivity to the Zhejiang pipeline grid. But the completion of a natural gas pipeline linking Zhoushan to Zhejiang's provincial gas grid in June paves the way for ENN to increase imports and market access. The new pipeline is designed to deliver up to 8bn m⊃;/yr (5.92mn t of LNG) of gas, with trial operations scheduled to begin later this quarter.

SK E&S aims to supply US shale gas and Australian LNG to China from its LNG supply portfolio, as part of its goal to directly supply LNG to overseas customers. The firm has a long-term offtake of 830,000 t/yr from Australia's 15.6mn t/yr Gorgon LNG project, a 2.2mn t/yr offtake agreement with the 15mn t/yr Freeport export facility in the US through its LNG procurement arm Prism International, and a supply agreement for 600,000 t/yr from the 7.6mn t/yr Tangguh LNG export facility in Indonesia.

ENN has LNG term supplies totalling 2.65mn t/yr from Total, Chevron and Australia's Origin and Woodside, with the Woodside deal for 1mn t/yr scheduled to start in 2025. ENN also signed a two-year LNG supply agreement with BP last month, with BP to supply 300,000 t/yr of regasified LNG to ENN's Guangdong-based subsidiary ENN Dongguan from the 6.7mn t/yr CNOOC-operated Dapeng LNG receiving terminal, starting from 1 January 2021.

Source: EvaluateEnergy® ©2024 EvaluateEnergy Ltd