China signs up to $50b gas deal
Relations between China and Australia may be at their lowest point for years on many fronts, but that hasn't stopped the signing of a massive deal last night which is the biggest single investment ever seen in Australia.
PetroChina has agreed to buy $50 billion worth of liquefied natural gas - 2.25 million tonnes a year over the next two decades - from Exxon-Mobil's yet-to-be developed Gorgon field off the coast of Western Australia.
The deal virtually guarantees that the Gorgon project will go ahead, creating 6,000 jobs at its peak.
Australia's Resources and Energy Minister, Martin Ferguson, was in Beijing to witness the signing ceremony, which was held behind closed doors.
"The ExxonMobil $50 billion LNG export contract to China represents the biggest export contract in the history of Australia," he said.
"It also potentially underpins the biggest single construction project in the history of Australia, which could see 6,000 workers on the job at the peak construction period."
Mr Ferguson says it is a foundation deal for the purpose of securing the Gorgon investment, and creating jobs and economic opportunities in Australia, while creating a sense of energy security for China.
"In the past, for example, such foundation agreements have underpinned the north-west shelf," he said.
"The ExxonMobil Chinese contract is one of the foundation contracts that enable the Gorgon project to stack up financially, and in doing so, enables the joint venture partners to actually move closer to final investment decision.
"China is resource and energy-hungry; Australia's well-placed to meet the needs of China as it goes forward on the development phase. With any relationship there are tensions from time to time, but life goes on commercially.
"China needs our resource and energy products, and we're looking to actually sell those resources and energy products to China. So the relationship is mutually beneficial."
Yet there are still indications of tension and nervousness between China and Australia, who have seen their relations strained by the arrest of four Rio Tinto executives in Shanghai.
The actual ceremony was held behind closed doors. Australia's greatest trade deal to date was signed with not a correspondent in sight to witness it, and journalists weren't even told where the event was happening.
Mr Ferguson says the deal has been resolved commercially, at arm's length to the Government.
ExxonMobil's Richard Ellis hailed the deal as a significant step forward for the joint-venture partners who will shortly decide whether to proceed with the Gorgon project.
"It's certainly a significant deal, both in terms of the provision of clean gas from the Gorgon project to China, and as we move towards a final investment decison in coming months," he said.
Mining analyst Peter Strachan says the deal virtually guarantees the Gorgon project.
"They wouldn't be selling the gas if they didn't think it was going to go ahead," he said. "I mean, it's getting pretty serious now.
"There'll be jobs for everyone from cleaners through to engineers, safety people, nurses, pilots ... whatever you can think of, there'll be a lot of people involved in supporting the development of a project like this."
Mr Ferguson says if the Gorgon project gets the final go ahead, he expects to see construction work starting on Barrow Island before Easter, and the first export contracts to China in 2015.
He says the agreement is of major economic importance to Australia as the country comes out of the global economic crisis.
"In a lot of ways, it represents a bigger investment in Australia than the Government's last economic stimulus package - hence the significance not only to the west coast of Australia, but the whole Australian economy," he said.
"The LNG sector is going to be very important as Australia goes into an economic recovery stage and the Government is hopeful a final investment decision is made prior to Christmas.
"Assuming an investment decision is made prior to Christmas, we will see construction workers on Barrow Island prior to Easter, and if everything went well we can see the first export contracts to China in 2015."
China signs up to $50b gas deal - ABC News (Australian Broadcasting Corporation)