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Gas Plan For Sokos Ditched By CLP Firm Looks To Invest In Mainland LNG Plant

Denise Tsang, SCMP – Sep 12, 2008

CLP Power (SEHK: 0002) has abandoned its controversial HK$10 billion plan to build a liquefied natural gas plant on the Soko Islands off Lantau.

The power company will instead look to invest in an LNG processing plant on the mainland.

“The Sokos project is stopped,” CLP’s commercial director Richard Lancaster told the South China Morning Post (SEHK: 0583, announcements, news) yesterday.

To ensure a secure supply of the clean fuel, CLP wanted to invest in either a regasification plant planned by PetroChina (SEHK: 0857, announcements, news) in Dachen Bay, Shekou , or one planned by China National Offshore Oil Corp (CNOOC (SEHK: 0883)) in Zhuhai , Mr Lancaster said.

It would also negotiate on sourcing gas from CNOOC’s gas fields in the South China Sea and from PetroChina’s planned 4,800km pipeline from Turkmenistan via Kazakhstan to Shenzhen, he said.

CLP had said the LNG project – which involved building a storage and regasification plant on South Soko Island and a pipeline to carry the fuel to the Black Point power station at Tuen Mun – was needed because reserves at CNOOC’s Yacheng gas field, off Hainan , were far less than expected and would run out soon after 2011 at the current usage rate of 2.5 billion cubic metres a year.

Opponents challenged the plan over fears it would damage an environmentally sensitive marine area and lead to higher electricity bills.

The fate of the project was thrown into doubt when Hong Kong and Beijing struck an energy pact last month to guarantee supply to the city for another 20 years, with CNOOC saying that with further drilling, Yacheng, could supply at least 2 billion cubic metres a year.

“We concur with the [Hong Kong] government view that [the LNG plant] is not needed after a memorandum of understanding on energy supply to Hong Kong was signed,” Mr Lancaster said.

The accord, which includes nuclear power supply, ensures the availability of cleaner fuel for electricity generation – and better air quality – and may reduce pressure to raise power tariffs.

Green groups last night hailed the CLP decision.

Angus Wong Chun-yin, of Friends of the Earth, said: “Although using natural gas is good for the environment, building a liquefied natural gas plant on the Soko Islands could have harmed the environment more.”

He said the project would certainly have destroyed an important habitat of the Chinese white dolphin.

But Mr Wong said more needed to be done to switch to clean fuel.

“Dropping the Soko Islands project should not be the end of the story. The Hong Kong government should press harder to require power companies to use more natural gas to generate power.”

Natural gas and nuclear power each account for about 20 per cent of CLP’s fuel mix, with coal making up 60 per cent.

A government source described CLP’s decision as “realistic and clever”. The source said the Environment Bureau would facilitate talks between CLP and the mainland authorities and companies concerned.

Mr Lancaster said CLP would go ahead with a 20-year gas purchase agreement with British-based BG. A preliminary agreement for the gas, originally intended to supply the Sokos plant, was signed in June.

The BG deal would fill a supply shortfall, he said. The Black Power plant could consume 3.4 billion cubic metres of gas per year, while CNOOC would supply 2 billion cubic metres and PetroChina 1 billion cubic metres annually by 2013.

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