Australia and China have struck their biggest trade deal, a A$50 billion (Dh151.31bn) agreement for PetroChina to purchase a 20-year supply of liquefied natural gas (LNG) from a massive project off Australia's west coast. The LNG would come from the 25 per cent interest in Australia's Gorgon gas development held by ExxonMobil, the world's biggest international oil company. Under terms of the agreement, the US-based energy major would supply 2.25 million tonnes per year of LNG to China's national petroleum company. The deal is the third struck by PetroChina in the past two years for LNG imports from Australia, and is the largest trade deal of any type that Australia has signed.
"This unprecedented export deal confirms Australia's importance as a global energy superpower supplying vital clean energy resources to China and our other Asia-Pacific trading partners," said Martin Ferguson, the country's energy and resources minister. "PetroChina is an increasingly important partner in the Australian LNG industry, and I hope the relationship will be long and successful." The deal comes as China seeks to increase its supplies of energy and minerals from around the world, and as major oil and gas exporters compete for access to China's expanding market.
Australia's Gorgon project is gaining momentum just as a number of other gas-exporting nations, including the heavyweights Qatar and Russia, are increasing LNG production capacity, contributing to the first global glut of the supercooled gas. If the project receives final regulatory and investment approvals later this year, it could produce 15 million tonnes of LNG annually. That would be equivalent to roughly a third of the current production capacity of Qatar, the leading LNG exporter.
So far this year, Qatar has added more than 15 million tonnes per year of new capacity, as part of an ambitious programme to raise its annual LNG exports to 77 million tonnes by the end of next year from 31 million tonnes last year. In April, Qatar agreed to supply 3 million tonnes per year of LNG to PetroChina under a 25-year contract. Gorgon targets gas production from multiple fields. The project is spearheaded by the US-based oil company Chevron, with a 50 per cent stake. The Anglo-Dutch energy group Royal Dutch Shell holds the remaining 25 per cent interest in the venture.
If it goes ahead, the A$50bn development would be Australia's largest resources project, dwarfing the A$12bn Pluto LNG project that Australia's Woodside Petroleum is developing. In November, PetroChina signed a 20-year deal to purchase 2 million tonnes per year of Gorgon LNG from Shell. The Chinese company also has a deal with Woodside for up to 3 million tonnes per year of LNG from the state of Western Australia's Browse gas project.
Although LNG prices on the spot market are at their lowest in several years, gas prices in long-term contracts are usually variable and linked to crude. Most analysts expect the LNG market to start firming in 2011. @Email:email@example.com