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The snafu is simple, power producers planning to use LNG from the country's first LNG project do not want to sign power purchase agreements with grid operators because - wait for it - China's ongoing power industry reform.
An official, who declined to be named, explained that, "As the government hasn't yet issued details of the power reform, the LNG-based power producers are reluctant to sign agreements until they are sure the reforms will provide preferential policies for higher tariffs when using clean fuels."
Negotiations between all parties concerned - the government, the power producers and the grid operators have yet to bear any fruit as no one can agree on power tariffs and volumes.
What is planned to be up and running by June next year is the LNG project in Guangdong province. Currently being constructed by CNOOC, the complete facility will have a receiving terminal, a pipeline grid and downstream utilities. The local government will be importing around 3.7 million metric tons of Australian LNG once operations begin. Around 60% of the import is earmarked for power generation purposes.
CNOOC owns a 33% stake in the facility. Other partners include BP Plc (30%), Hong Kong & China Gas Co (3%), and Hong Kong Light & Power Co with the balance being held by a consortium of Guangdong gas utility companies.