Sinopec Corp. has commenced work on a CNY 9.66 billion liquefied natural gas project in Shandong province, as part of efforts to expand its gas portfolio in the fast growing domestic market.

The Qingdao unit is Sinopec's first LNG project in China. It is designed to receive 3 million tonnes of LNG and supply 4 billion cum of gas every year. The project will receive LNG from ExxonMobil's project in Papua New Guinea.

Sinopec has signed a long term contract to buy 2 million tonnes of LNG from the project annually. Sinopec expects to start operating the Qingdao plant by November 2013. It is also considering a second phase for the project at a later date.