Australia and China struck their biggest trade deal ever yesterday as the world's two most valuable listed oil companies, ExxonMobil and PetroChina, agreed a $41-billion liquefied natural gas deal.
"It's a statement about the nature of our two economies and the fact that Australia is important to China, just like China is important to Australia," Australian Resources Minister Martin Ferguson said in Beijing.
The massive Gorgon LNG project operated by Chevron Corp, which owns a 50-percent stake, is located off Western Australia and has a proposed annual output of 15 million tons per annum (mtpa). Exxon and Royal Dutch Shell each own a 25-percent stake.
The agreement with PetroChina means buyers have now been found for the all of Exxon's share in the Gorgon, the US oil giant said in a statement.
The Gorgon project off Western Australia has a proposed annual output of 15 mtpa. [CFP]
It comes just weeks after Exxon inked a A$10-billion Gorgon sales deal with India's Petronet, marking Australia's first ever LNG contract with India.
The latest deals, along with the regulatory approvals process from the federal government now nearing completion, mean the Gorgon partners could approve the massive project as early as next month.
"The A$50-billion contract to supply PetroChina is a foundation contract that will assist in getting the Gorgon LNG project to final investment, and that again would represent the biggest stand-alone project in Australia's history," said Ferguson.
The deal came hard on the heels of an iron ore deal between China and Australia's No 3 miner on Monday.
Ferguson said China had given the necessary approvals to the deal and the project was expected to start producing gas in 2015.
"Just think about it, one project will see about 6,000 Australian workers at the peak of construction and buy about $30 billion worth of Australian goods and services over the next few years.
"It also, from an Australian point of view, brings on 150 terajoules of invested gas per day into the West Australian market no later than 2015, and has the potential to represent for Australia export income with contracts to sell around $300 billion worth of LNG to customers in the Asia-Pacific region over the next 20 years."
With the latest sale, PetroChina will be the largest buyer of gas from Gorgon. Under the deal with Exxon, it will buy 2.25 million tons per annum (mtpa) of gas from the project for 20 years, adding to a previous 20-year agreement signed with Shell for 1 mtpa.
A source with Chevron said the company was in talks to supply a similar volume of Gorgon LNG to PetroChina's smaller rival, CNOOC.
Despite the volumes it is buying, PetroChina has not secured a minority stake in the project, pointing to buoyant demand for long-term LNG supplies despite the economic downturn.
Chevron and its partners may give final investment approval for the much-delayed project as early as next month, with the project expected to cost about A$50 billion, according to Western Australia Premier Colin Barnett.
With a long list of around a dozen proposed LNG projects in the Asia-Pacific region, buyers are also eager to lock in supplies as quickly as possible from projects that are most likely to be developed.