A joint venture is being finalised by Zhenhua with Jiangsu Guoxin Investment Group for the gas importing terminal

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Zhenhua produces oil and gas in Abu Dhabi, Egypt and Kazakhstan. (Credit: Carlo San/FreeImages)

China’s Zhenhua Oil is reportedly in advanced talks with a provincial government-backed firm to build a natural gas receiving terminal in the eastern part of the country.

A joint venture is being finalised by Zhenhua with Jiangsu Guoxin Investment Group for the investment, sources told Reuters.

In 2020, Jiangsu used 30.7 billion cubic metres, staying as the top gas consuming province in China. The province currently has two liquefied natural gas (LNG) terminals with a capacity to handle 9.5 million tonnes of LNG imports a year.

Zhenhua, a unit of state defense company Norinco Group, is expected to hold a 34% stake in the proposed venture. Guoxin, a firm backed by provincial government that owns gas pipelines, is anticipated to 61% stake in the joint venture.

Reuters quoted a source as saying: “The (proposed) JV marries the strength of Guoxin as a provincial pipeline operator in a top gas consuming region and Zhenhua as an experienced trader with oil and gas assets globally.”

Under the phase one, the project is expected to see an investment of CNY6bn ($928.8m). The phase will involve construction of three 200,000 cubic metre tanks with annual handling capacity of 3 million tonnes.

Construction at the man-made island of Yangguangdao in Rudong county commenced in June this year, the sources told the news agency.

It is expected to be completed by the end of 2023.

Zhenhua, which produces oil and gas in Abu Dhabi, Egypt and Kazakhstan, established its LNG division in mid-2018.

The company is said to be one of the earliest traders that emerged successful in auctions to use gas terminals operated by CNOOC.

In July this year, Xinhua news agency reported that China started construction on a $1bn natural gas import and storage base in the southern coastal province of Guangdong.

Guangdong is expected to commence operations at the import facility by the end of 2023.