Interfax-China reported that China National Offshore Oil Corp is having trouble selling the liquefied natural gas that it is importing from Qatar.

Mr Kevin Zhuang director of the Guangdong Oil & Gas Association gas department said CNOOC has found few downstream gas customers due to the high price it is paying for the Qatari LNG which is being supplied by the country gas giant, Qatargas. As such, CNOOC is only using Qatari LNG to supply several of its own refineries and power plants, such as the Huizhou Refinery and Jaiming Power Plant in Guangdong Province.

Mr Zhuang said the price that CNOOC pays Qatargas for the LNG shipments is linked to the price of Japan Customs-cleared Crude. JCC is the average price of customs-cleared crude oil imported by Japan and also serves as a common index for long-term Japanese LNG purchases.

He said unlike CNOOC LNG contract with Australia's Woodside Energy, there is no ceiling price in its contract with Qatargas, so the price of Qatari LNG effectively floats with international crude oil prices.

Mr Zhuang noted that CNOOC originally intended for the Qatargas shipments to supply its LNG terminal in Zhejiang Province, but the terminal remains under construction and is not scheduled to be completed until next year.

Mr huang believes that if the central government cannot work out a solution to link downstream gas prices with upstream crude oil prices or gas purchase prices, CNOOC as well as China other LNG importers, will continue to have trouble selling imported natural gas.

CNOOC received its first LNG shipment from Qatargas on October 18th at its Dapeng LNG terminal in Guangdong. According to the agreement between CNOOC and Qatargas, CNOOC will receive 2 million tonnes of Qatari LNG annually over a 25 year period.

(Sourced from Interfax-China)