Shell closing in on Hong Kong LNG supply deal

The Hague-based LNG giant, Shell, has reportedly closed in on signing a deal to supply liquefied natural gas to Hong Kong.

Citing sources close to the matter, Reuters reports, Shell edged out a number of companies, including Malaysia’s Petronas to clinch the supply deal for the long-term supply of LNG to Hong Kong’s utility, CLP Power.

According to the report, Shell would deliver 1.2 million tons of LNG per year to the Hong Kong utility under a 10-year term. Deliveries are said to start in 2020.

However, the supply deal depends on a positive financial investment decision (FID) on an LNG import facility based on a floating storage and regasification unit (FSRU). CLP expects the LNG-to-power project to start operations in 2020.

Hong Kong, that currently fuels its power plants with imported fuel or natural gas delivered from mainland China, is looking to increase the use of natural gas in its total fuel mix for power generation by 2020. In 2012, natural gas had a 22 percent share in 2012 and is planned to grow to about 50 percent in 2020.

In addition, the natural gas demand is expected to grow past 2020 as it looks to meet environmental targets.