Milestone is in the pipeline

China breaks into global market for top-end oil-gas equipment with LNG project in Russia

China Offshore Oil Engineering Co's go-global strategy will accelerate and reach another milestone in July.

That's when it will ship to Russia the remaining 16 modules, or advanced heavy equipment, for the Yamal liquefied natural gas project. They will arrive on July 20 - 10 days ahead of schedule. The 20 core modules reached Russia in January.

This is the first LNG core equipment independently designed and constructed by China.

COOEC has mastered the technology for LNG core-process module construction and made inroads into the international high-end oil-gas equipment market, the company says.

The Yamal LNG project, in the Arctic region of Russia, was the world's first integrated project for polar natural gas exploration, development, liquefaction and transportation.

It is expected to begin operations this year. Much of Yamal's output will be supplied to China and other Asian countries, with China National Petroleum Corp having pledged to buy at least 3 million metric tons of LNG per year.

Wang Lu, an Asia-Pacific oil and gas analyst from Bloomberg Intelligence, says imports from Yamal will possibly account for more than 1.6 percent of China's gas demand, which is estimated to be 257 billion cubic meters in 2018, assuming a 10 percent compound annual growth rate during the 2016-20 period.

"China's LNG imports will continue to be an important contributor to its supply-scape in 2020," she says.

Evgeniy Kot, director-general of the Yamal project, says the company has sold 96 percent of the project's LNG production to European and Asian customers through 20-to 25-year contracts.

COOEC signed a contract worth $1.64 billion (1.54 billion euros; ￡1.31 billion) with the Yamal LNG project in 2014 to build Module Fabrication Work Package 1, also known as MWP1, which includes 36 core modules of an LNG factory, a major facility in the Yamal LNG project.

It was the largest overseas contract that COOEC has signed.

It is also China's first export of LNG core modules, indicating that China has entered the international high-end oil and gas equipment market.

Two core process modules of MWP1 undertaken by COOEC, the two largest and most important modules in the project, were delivered last year. The biggest one comprises seven decks and weighs 6,467 metric tons.

They take on the "core" function of liquefying natural gas in a severe environment to guarantee that super high and heavy pressure vessels can be configured beside numerous process pipelines.

The company has made breakthroughs in many key technologies such as welding, deep-cooling heat preservation and super large, irregular equipment hoisting.

The company attributed 60 percent of its profit to overseas projects in countries and regions along the Belt and Road Initiative, according to Zhong Wenjun, chief engineer of COOEC.

Zhong says the future market is unpredictable, but policies like the Belt and Road Initiative offer good guidance on investment abroad.

COOEC currently has several projects under construction and has bid for a project in Uganda to build an engineering site - an attempt to make inroads into the African market.

The company has won the first round of bidding and is focused on the design work for the next round.

That was possible on the back of China's heavy investments in overseas infrastructure construction under the Belt and Road Initiative.

Zhou Xuezhong, chairman of COOEC, says its construction of the core modules of the Yamal LNG project has a far-reaching impact on the sea oil industry and even the development of China's manufacturing sectors.

"It is not only in line with the vital national development strategy including the Belt and Road Initiative, but promotes technology upgrades in the sea oil industry," Zhou says.

"It has brought new opportunities to China's sea oil industries to participate in international production and manufacturing."

Cheng Yu contributed to this story.

Contact the writers at zhengxin@chinadaily.com.cn

(China Daily European Weekly 04/21/2017 page27)