Himfr.com Reports $40b Australia LNG deal lapses

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No major impact on market, but nation 'needs to diversify imports' Energy giant PetroChina Co Ltd has pulled out of a $40 billion deal to buy

natural gas from a project off Australia, but Chinese analysts and officials yesterday tried to play down the impact on the Chinese market or

bilateral relations.

Australia's second largest oil and gas producer Woodside Petroleum Ltd informed Australia's stock exchange on Monday that an early stage agreement

for the Browse Basin liquefied natural gas (LNG) project off Western Australia state had not been settled by a Dec 31 deadline and had now lapsed.

Under the September 2007 agreement, PetroChina would have potentially bought up to 3.3 million tons of LNG per year for up to 20 years.

At the time, it was one of Australia's largest export deals worth an estimated A$45 billion ($40 billion).

"I don't think it will hurt the domestic market. The growth momentum in China's natural gas market will continue," Dong Xiucheng, professor at

China University of Petroleum, said yesterday.

Foreign Ministry spokeswoman Jiang Yu said she was not aware of the specifics of the issue, but stressed that the economies of China and Australia

are complementary, and promoting trade and investment serves the common interest of both countries.

PetroChina said last night that a delay in the development of the Browse project was the major reason behind the lapse of the deal.

Some analysts also said it was probably because PetroChina had become dissatisfied with the cost in the two years since the deal was signed.

The lapse of the deal means that the terms, including price, for a large chunk of Browse Basin gas are once again fully open to negotiation.

"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.

Natural gas prices peaked in the middle of 2008, but have been on a decline since then, tumbling more than 50 percent.

PetroChina would probably look for other sources of gas, said Yang Wei, an oil industry analyst at Guotai Junan Securities in Shanghai.

"I think it's probably because the price is not right. It's too high," he said.

Woodside and PetroChina "have agreed to keep each other informed of progress in their respective LNG export and import projects," Yvonne Ball, the Australian company's spokeswoman, told China Daily yesterday.

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