China To Begin Gas Talks

The talks, which could begin in early September, are part of intense negotiations designed to turn the Chinese government decision to appoint the NWS project as the supplier to its first LNG terminal at Guangdong into a formal agreement.

Under the terms of an international tender awarded to project marketing operation AustraliaLNG earlier this month, the Shelf has to begin deliveries of LNG to Guangdong by 2005.

That means initial shipments are likely to be supplied from existing NWS facilities and the fourth production train now being built on the Burrup Peninsula.

John Akehurst, managing director of Woodside Petroleum, the NWS operator, said last week he expected talks to begin soon on the precise form of Chinese equity. He said the equity offer applied only to that part of the Shelf project involved with supplying the Chinese contract.

The Shelf partners' equity offer to the China National Offshore Oil Co is regarded as crucial as price in the decision to award the contract to supply a minimum of three million tonnes of LNG a year for 25 years.

CNOOC is a state company with the exclusive rights to the exploitation of hydrocarbon resources in the offshore areas of China in co-operation with foreign enterprises.

It is understood the term sheet -- running to more than 100 pages -- contained in Australia's successful submission for the Guangdong contract offers CNOOC a substantial level of equity in gas reserves.

BHP Billiton Petroleum's Phil Aiken, who is chairman of the project owners' group, has said publicly that CNOOC has been offered a 25 per cent stake in a joint venture that would own some 4.3 trillion cubic feet of Shell gas reserves.

This would be sufficient to guarantee supplies for 25 years, even if CNOOC negotiated to take up five million tonnes of LNG a year from the Shelf.

Mr Aiken said CNOOC would be the biggest single equity holder in the new joint venture. Woodside, Shell, BP, BHP Billiton, Chevron-Texaco and Mitsubishi/Mitsui would each have a stake.

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