China, Australia ink huge LNG deal
China, Australia ink huge LNG deal
The Jakarta Post, Jakarta
Chinese firm CNOOC Limited and Australia's Gorgon consortium signed on Friday an agreement that the companies said could lead to one of the biggest liquefied natural gas (LNG) deals in the industry's history.
The deal, if materialized, could dim chances for Indonesia, the main competitor of Australia for the massive Chinese LNG market, to broaden its market share in the world's most populous nation, one analyst said.
Friday's agreement calls for the parties to allocate a significant volume of Gorgon LNG for use in the growing Chinese market, CNOOC Limited said in a statement.
Subject to the completion of formal contracts, CNOOC Limited will purchase an equity stake in the Gorgon gas development and its parent, China National Offshore Oil Corporation will arrange to purchase a certain volume of LNG directly from Gorgon.
CNOOC is already involved in two LNG receiving terminal projects in China, in Guangdong and Fujian.
CNOOC Limited said that after the second phases of Guangdong and Fujian LNG projects were completed, Zhejiang and other coastal provinces may potentially be new locations identified for the expanding LNG trade in China.
The press statement did not specify the value of the contract.
However, AFP quoted Australia's Trade Minister Mark Vaile as saying that it could reach A$30 billion (US$20.7 billion).
"This is about the conditions of getting the field up and producing, CNOOC taking an equity stake in the project and that leading to an agreement on price and long-term contract," Vaile told reporters.
The newly appointed chairman and CEO of CNOOC Limited, Fu Chengyu, who accompanied Chinese President Hu Jintao on his visit to Australia, said, "We look forward to becoming an active and constructive player in the Australian hydrocarbon business as a Gorgon participant."
"This potential investment in the Gorgon Project will further strengthen our natural gas strategy and dominant position in supplying the growing natural gas markets in coastal China," he added.
The Gorgon gas field off Australia's northwest coast is owned by ChevronTexaco, Royal Dutch Shell and ExxonMobil.
Last year, Australia signed a deal worth A$25 billion with China to supply LNG from Australia's North West Shelf project to Guangdong.
Indonesia, which also bid for the Guangdong project, was awarded a smaller contract to provide LNG from the Tangguh plant in Papua to Fujian. Indonesia will supply 2.5 million tons of LNG to Fujian per year, while an Australian company will provide Guangdong with over 3 million tons of LNG per year.
Indonesia has been trying to entice China to buy more of its LNG.
During the recent ASEAN + 3 Summit in Bali, Indonesian Minister of Energy and Mineral Resources along with several other ministers met with the Chinese delegation to discuss the possibility for China to buy more LNG from Indonesia.
Minister of Energy and Mineral Resources Purnomo said that Indonesia particularly hoped to increase the supply volume to Fujian given the fact that the receiving terminal being built in the province has a larger capacity than the contract volume signed by Indonesia and China last year.
Indonesia is the world's largest LNG producer with output standing at 30 millions tons annually, exported chiefly to Japan, South Korea and Taiwan. China is a new LNG market in the region but the market is considered to have a huge potential given the population of 1.3 billion and status as a rapidly developing industrial nation.