Chinese Petroleum wins huge natural-gas contract

State-run Taiwan Power Co (Taipower, 台電) yesterday awarded a NT$298.2 billion gas contract to another government-owned company, Chinese Petroleum Corp (中油).

Chinese Petroleum and its partners in Qatar beat three other consortia -- including a Royal Dutch/Shell-Asian Cement Co (亞泥) joint venture -- to supply 1.7 million tonnes a year of liquefied natural gas (LNG) to the Tatan power plant.

Chinese Petroleum undercut its current fuel charges to secure the deal, Taipower said in a statement on its Web site.

The contract underscores rising competition as LNG projects in the Middle East, Australia, Indonesia, Malaysia and Russia boost output faster than the market can absorb it.

Chinese Petroleum may increase purchases from Qatar to replace a 1.5 million tonnes-a-year Indonesian contract that expires in 2008.

``This is a buyer's market, therefore we can negotiate to cut the price,'' said Chinese Petroleum vice president Roy Chiu (邱吉雄).

``That's also why we aren't likely to renew the 1973 contract with Indonesia, because back then it was a sellers' market," he said.

Foreign business concerns that political pressure was interfering with the Tatan decision seem to have been allayed by the announcement.

"We're very pleased to hear this result," said Tiffany Huang (黃台芬), senior partner at law firm Baker & McKenzie and chair of the European Chamber of Commerce in Taipei's Project and Procurement Committee.

The remaining two bids came from Tung Ting Gas Corp (東鼎), whose shareholders include Japan's Mitsubishi Heavy Industries Ltd and Taiwan's China Development Industrial Bank (開發工銀) and United Resources Inc (聯合資能), which was expected to source its gas from the Tangguh LNG project in Indonesia.

Local media had speculated that Vice President Annette Lu (呂秀蓮) had pressured Taipower to accept the United Resources bid as a sweetener to secure an official visit to Indonesia by President Chen Shui-bian (陳水扁). Such a visit never occurred.