Effect on Chinese market downplayed after Australian LNG stalemate

12 Jan 2010 - Port Planning

Woodside Petroleum Ltd informed the Australian stock exchange on Monday that an early agreement to begin the Browse Basin liquefied natural gas (LNG) project off Western Australia state had not been reached by the Dec 31st deadline and has now reached a dead end.

The agreement, as reported by Port Technology last week, was due for commencement in 2013 and stipulated the sale of three million tons of LNG to China each year. It is said the contract was to be the largest signed between Australia's second largest oil and gas producer and the massive energy conglomerate PetroChina Co Ltd. It believed the fall-out from the deal will impact the Chinese market greatly however many analyst are downplaying the severity of the situation."I don't think it will hurt the domestic market. The growth momentum in China's natural gas market will continue," said Dong Xiucheng, professor at China University.A spokesperson for the Chinese Foreign Ministry stressed that although the ins-and-outs of the collapse was not known promoting trade and investment serves the common interest of both countries and the relationships between China and Australia would not be damaged.Many analysts have offered insight into what they believe the main cause for the failure to reach an agreement was: PetroChina was retrospectively not content with the overall cost two years after the deal was signed. "The deal was good at the time, but in the past two years, things have been changing rapidly," said Peter Kopetz, energy analyst with Western Australia-based State One Stockbroking.Since mid 2008 the cost for natural gas has peaked, entering into a trough period by dropping more than 50 percent from its top-line price.A spokesperson announced on Tuesday that Woodside and PetroChina "have agreed to keep each other informed of progress in their respective LNG export and import projects”.

Business Directory