Chinese Petroleum peeved over leaky natural gas tanks

Chinese Petroleum Corp (中油) is seeking millions of US dollars in damages from Japan's Mitsubishi Heavy Industries Ltd for building three leaking liquified natural gas (LNG) storage tanks, according to Chinese-language reports yesterday.

Chinese Petroleum Chairman Chen Chao-wei (陳朝威) was quoted by local media as saying the state-run company would seek NT$12.8 billion (US$376 million) damages from Mitsubishi Heavy and has called for the Japanese firm to be barred from participating in future public works projects.

Mitsubishi Heavy maintains that the leaks are minimal and has suggested the dispute be resolved by international arbitration.

The project was part of the expansion of Chinese Petroleum's Yungan LNG terminal in Kaohsiung County, south Taiwan.

The terminal stores the LNG Chinese Petroleum buys from Indonesia and Malaysia.

Mitsubishi Heavy began building three LNG storage tanks for Chinese Petroleum in 1991.

Each tank can store 130,000 cubic meters of LNG.

Construction was scheduled to be finished in 1996, but when construction was over, Chinese Petroleum refused to accept the tanks because they leaked LNG, posing a safety hazard to nearby residents.

The dispute could mean Mitsubishi Heavy's investment in the Tung Ting Gas Corp (東鼎液化瓦斯), made in that hope that the Taiwan firm would win the NT$395 billion contract to supply a LNG-fired power station in northern Taiwan, may have been in vain, according to the reports.

Tung Ting Gas is a joint venture of China Development Industrial Bank (中華開發銀行), Uni-President Group (統一集團) and Evergreen Group (長榮集團) of Taiwan, as well as Mitsubishi Heavy, Itochu Corp, the Kansai Electric Power Co Inc, Osaka Gas Co Ltd of Japan, among others.

Bidding for the 25-year contract to supply the Tatan (大潭) power station being built in Taoyuan County by the state-run Taiwan Power Co (台電), is slated to reopen on Aug. 27.

Due to what industry experts said were unreasonable conditions for the contract, the last round of bidding failed due to a lack of interest.

Tung Ting, which began as a subsidiary of the financially troubled Tuntex Group (東帝士集團) but now operates as a an autonomous entity, hopes to win the contract to supply the Tatan station and northern Taiwan via a planned 80 hector liquified natural gas receiving terminal in Taoyuan.

The terminal will be located within the Kuantang (觀塘) Industrial Park and Industrial Port, upon which Tung Ting began work in late May.

The project will cost an estimated NT$100 billion, with the first stage expected to be completed by 2004.