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.