BP Amoco likely to win LNG supply contract to China

BP Amoco likely to win LNG supply contract to China

BEIJING (Dow Jones): BP Amoco PLC (BP) is likely to win the
supply contract for China's first liquefied natural gas project,
but will need to give up equity in its gas fields as part of the
deal, the China Daily reported on Thursday.

China is still evaluating bids for the $10 billion contract to
supply a yet to be built receiving terminal in Shenzhen with 3
million metric tons of LNG a year. BP has already been invited to
take a stake in the $600 million terminal project, the first of
its kind in China.

"BP, as the sole foreign partner of the project is the first
choice under equal conditions," the newspaper reported, citing
Zhao Xiuguang, director of the natural gas department of China
National Offshore Oil Corp., or CNOOC.

The report appeared to confirm speculation that CNOOC will
demand upstream equity as part of any supply deal.

"CNOOC will have a share in the gas fields supplying the
project, but won't hold a dominant stake," the newspaper also
reported, quoting Wu Fengliang, deputy manager of CNOOC's
overseas development department.

BP Amoco has a stake in Australia's North West Shelf project
and Indonesia's Tangguh as well as a gas field in Malaysia.

The consortium producing liquefied natural gas in Australia's
north west shelf is ready to offer natural gas equity to China in
order to win a US$10 billion contract to supply China with LNG, a
senior industry official said in a recent interview.

Alf D'Souza, vice president of Australian LNG Pty Ltd., told
Dow Jones Newswires in an interview that Australia welcomes
China's participation in the natural gas development.

D'Souza has also expressed interest in Chinese companies
participating in the north west shelf project - Australia's only
existing LNG producer. China already has heavy investments in
iron ore and alumina production in Australia.

He said as China is mulling LNG supplies to its first LNG
project in southern China, the country appears keen to have some
upstream equity in the producing countries so as to ensure long-
term and stable supplies.

Proven and probable gas resources associated with the north
west shelf project alone currently total 30 trillion cubic feet,
sufficient to underpin Australia's current production for 30
years, D'Souza said.

However, he said this is only part of a bigger picture, which
includes a series of gas discoveries in the greater north west
shelf region and northern Australia currently estimated to total
more than 100 trillion cubic feet.

In addition, D'Souza said the region has a potential of
between 50 trillion and 170 trillion cubic feet in future
discoveries.

Competition for the supply contract has heated up since China
last week announced it has shortlisted BP Amoco PLC (BP) as the
foreign investor for a 30 percent stake in the $600 million LNG
terminal project in southern China's Guangdong province.

Australia is one of the major competing countries for the
supply contract. Other potential suppliers include Indonesia,
Malaysia, Yemen and Qatar.

D'Souza said Australia is well-positioned amid the competing
suppliers to win a share of China's LNG market.

A senior Qatar delegation will be paying a second visit to
Beijing next month to lobby for the supply contract, following up
on a visit to Beijing last year by the country's energy minister.

A government-appointed consortium led by China National
Offshore Oil Corp., or CNOOC, is expected to begin the tender for
the supply contracts later this year.

China said the first phase of the Guangdong project calls for
a supply of 3 million tons a year by 2005, expandable to 5
million tons/year in the second phase by 2007. Construction of
the terminal, the first of its kind in China, is expected to
begin next year.