OREANDA-NEWS. December 09, 2013. China's largest refiner is in early talks with U.S.-based oil-and-gas producer Apache Corp.  to buy a minority stake in a liquefied natural-gas project on Canada's Pacific coast, people familiar with the matter said.

The LNG project, known as Kitimat, is one of several LNG projects that China Petrochemical Corp. is looking at in the region, one of the people said. The management team of the Chinese company, known as Sinopec, has yet to authorize the investment, and it could select another Canadian LNG project to invest in, the person said.

Although the size and value of the stake hasn't been determined, Sinopec's investment would go toward paying for the cost of the project, one of the people said. Apache last year pegged the cost at USD15 billion.

A Sinopec spokesman said it was inappropriate to comment on corporate actions prior to public announcement.

"Apache is moving forward with the project, and we're looking for partners," an Apache spokesman said. He declined to comment on potential talks and said the cost of the project was being recalculated.

Apache Corp. in February upped its stake in Kitimat from 40% to 50%, which valued the project at \\$4.05 billion. The assets in Kitimat, a coastal town in British Columbia, include an LNG processing plant, pipelines and 644,000 acres of undeveloped shale resources. Apache will operate the upstream assets, while its partner--U.S.-based Chevron Corp., which own the other 50%--will operate the downstream assets.

The move comes as China looks to double the share of natural gas in its energy mix to 10% by 2020 from less than 5% now. Although China has ambitious plans for unconventional fuels such as shale gas, large-scale production is at least a decade away, creating opportunities for importers of LNG--the chilled and exportable form of natural gas. Sinopec is China's largest refiner by output.

Sinopec could also be a buyer of LNG produced by the project.

Meanwhile, Canada is trying to transform its underdeveloped northern Pacific coast into a major hub for LNG by using a glut of natural gas from untapped reserves inland. The Canadian government has also been trying to shift gas exports away from the saturated U.S. market and into LNG-hungry Asian markets such as China.

Earlier this month, the Canadian subsidiary of China's primary offshore energy producer, Cnooc Ltd., was awarded exclusive rights to proceed with a proposed terminal to export LNG from Canada's Pacific coast.

Apache struck a deal last month with Sinopec to sell a one-third stake in its Egypt oil-and-gas business for USD3.1 billion.

Kitimat originally was designed as an import terminal that would receive liquefied gas shipped from the Middle East and Australia, convert it back into a gas and transport it via pipelines to Canada and the Western U.S. But the joint venture, known as Kitimat LNG, said in 2008 that new North American gas supplies made such a facility unnecessary and it would build an export terminal instead.