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Australia-China LNG deal sealed

AUSTRALIA'S landmark liquefied natural gas contract with China's Guangdong province - the nation's biggest single export deal - has finally been sealed, more than two years after it was announced.

Despite high hopes that the final deal to buy North West Shelf gas could be sweetened to 3.7 million tonnes a year, the project partners have been unable to increase the volume of gas deliveries above the 3.3 million tonnes a year announced by Prime Minister John Howard in August 2002.

Even so, at $25 billion nominal value the deal remains the biggest single Australian export contract.

While the price has been criticised as being low at a time when LNG is in keen world demand, it is understood that the North West Shelf project will charge a tolling fee over the sale price to process the gas for shipment to southern China.

North West Shelf Australia LNG said yesterday that completion of the deal had been held up by a long process of meetings conditions to ease concerns on both sides.

Since the signing of the conditional sale and purchase agreement covering the 25-year supply of LNG to Guangdong, a long process of satisfying conditions precedent had taken place.

"It is China's first LNG supply contract and they wanted to be reassured," a spokesman for North West Shelf Australia LNG said yesterday. "It is a very big, very complex arrangement and one we needed to be satisfied on as well."

The gas sales agreement was signed in Perth on Sunday with representatives of Guangdong Dapeng LNG, a group made up of 11 organisations headed by the Chinese government-owned China National Offshore Oil Corp. Later this week there will be a formal announcement of an equity arrangement in which CNOOC will secure ownership of about 5 per cent of North West Shelf gas reserves to underpin the Guangdong contract. This will take the form of a separate China LNG project joint venture.

CNOOC will have a 25 per cent stake and the existing Shelf partners - Woodside Petroleum, BHP Billiton, BP, ChevronTexaco, Japan Australia LNG (MIMI) and Shell - will each take 12.5 per cent.

Guangdong Dapeng LNG chairman Wu Zhenfang said the LNG project was the beginning of a very important journey for China in developing a world-class natural gas industry.

"We are very pleased to have reached this important milestone and look forward to the next stage of our partnership with the supply LNG in 2006," Mr Wu said.

John Banner, president of North West Shelf Australia LNG, said the conclusion of the deal was a good example of co-operation between industry and governments in Australia and China.

"We look forward to the day when the first cargo of LNG leaves Australian shores for China in 2006 and to opportunities on how we can support the expected rapid growth in LNG demand in Guangdong," Mr Banner said.

As part of the deal the Shelf project and Guangdong have agreed on a dedicated shipping service and the formation of an Australia-China natural gas technology partnership fund, which will train plant operators for the receival terminal in China.

The contract to be the first LNG supplier to China was hard won, with competition from Indonesia, Malaysia, Qatar, Russia and Yemen.

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