NWS Is On The Short List for Chinese LNG Supply

Australia's North West Shelf (NWS) Project has been invited by the Joint Executive Office of the Guangdong LNG Project to negotiate a contract for the supply of liquefied natural gas (LNG) to the first receiving terminal to be built in China, at Chengtaojiao, near Shenzhen in the southeast of the country.

It represents an important milestone towards concluding a long-term contract. The shortlist selection was a result of evaluation of competitive bids for supply that closed in Beijing on 18 December 2001, and the recommended shortlist required central government endorsement. Earlier, the NWS Project's marketing agent, Australia LNG (ALNG) had been invited to bid together with six other competing LNG suppliers from the Middle-East and Asia-Pacific region.

The Chinese have informed ALNG that the next step in the process to select their inaugural supplier will be to conduct further negotiations with their shortlist of potential suppliers. These negotiations will take place over the next few months. The Chinese authorities will then make a final selection.

Commenting on the announcement, the President of ALNG, Arthur Dixon, said that he was very pleased Australia's NWS Project made the short-list, "We have submitted a complete proposal, one which we believe the Chinese will find comprehensive and competitive, especially in today's circumstances. This is a very important second step but we still have a considerable way to go", he added.

"The receiving terminal will re-gassify the liquefied gas, and city gas and electric power companies in these areas will buy natural gas transported from the terminal by high pressure pipeline. "This deal has the potential to significantly increase the trade between our countries and with that, bilateral relations and energy security for China", Mr Dixon added.

China intends to import 3 million tons per year of LNG, commencing late 2005. Many observers believe China is likely to expand its imports of liquefied natural gas, which could become an important energy source for the rapidly growing coastal provinces of the country, if this initial project proves successful.

ALNG acts as the marketing agent for each of the six North West Shelf Participants, who will be the sellers of record if any contract is concluded. The NWS Participants are BHP Billiton Petroleum (North West Shelf) Pty Ltd, BP Developments Australia Pty Ltd, Chevron Australia Pty Ltd, Japan Australia LNG (MIMI) Pty Ltd, Shell Development (Australia) Proprietary Limited and Woodside Energy Ltd.

A Heads of Agreement (HOA) exists between Chinese National Offshore Oil Company (CNOOC) and each of the NWS Participants under which CNOOC would take equity in the NWS Project by participating in the new joint venture for the supply of LNG to China. This HOA was signed on November 17, 2001 and is subject to the NWS Project being successful in securing the LNG supply contract with the Guangdong Project and a satisfactory conclusion in separate negotiations with CNOOC.