I think you need to get the facts about this project. It is significantly bigger than you have reported.

Australia signs $50bn gas deal with China

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Michael Sainsbury, China correspondent | August 19, 2009
Article from: The Australian

AN Asia-fuelled, decades-long windfall for Australia’s natural gas sector looks assured with up to $100 billion of fresh investment over 12 to 18 months expected across a range of projects after China promised last night to buy $50bn worth of natural gas from the proposed North West Shelf Gorgon development.

The Gorgon venture promises to be Australia’s biggest resources project, pumping $40bn into the federal government’s tax coffers over the next 20 to 30 years.

The deal is the latest sign that while diplomatic relations between Australia and China have ebbed to a decade low, Beijing’s appetite for Australia’s resources remains undiminished, coming only a day after Fortescue Metals Group said China’s state-owned banks would back its rapid expansion with $US6bn ($7.3bn) in loans.

This is the latest and biggest deal in the unprecedented escalation of gas projects which take in the $50bn Gorgon project and several deep-sea gas field developments by Australia’s Woodside Petroleum, as well as surging interest in coal-seam gas deposits, mainly in Queensland.

Already hundreds of billions of dollars in commitments have been signed, with not only China but also Japan, India and South Korea, as the search for cleaner energy options intensifies.

“If everything goes well (with Gorgon), construction will start in about February next year,” federal Resources Minister Martin Ferguson said in Beijing yesterday.

“It’s also a major stimulus package.”

The Gorgon project — which now has commitments of $200bn in sales out of a projected $300bn from the entire project — has promised flow-on effects of $33bn to the construction, manufacturing and services sector, and 6000 jobs over the next four to five years.

“As well as Gorgon and Woodside, there is the Sunrise project in the Timor Sea,” Mr Ferguson said.

“We also have an emerging industry on the east cost — coal-seam methane. So we now have the opportunity, in my opinion, over the next 12 to 18 months, of getting investments of up to $100bn in the LNG sector.”

Mr Ferguson said it was “business as usual” with China, but admitted that “from time to time there will be diplomatic tensions” between Australia and other countries.

Today, Mr Ferguson will meet Zhang Ping, the head of China’s most important ministry, the National Development and Reform Commission, which looks after the country’s macro-economic affairs and has recently been handed command of energy reserves. Mr Ferguson has promised to repeat the government’s call to expedite the handling of the case of arrested Australian Rio Tinto executive Stern Hu.

As reported by The Australian yesterday, the bilateral relationship between Australia and China has reached its lowest point since former prime minister John Howard met the Dalai Lama, and his foreign minister, Alexander Downer, promised that Australia would back Taiwan in any battle with the mainland.

“The relationship between China and Australia has dropped to the lowest point in the past couple of years, with so many events since May, when Australia launched its defence white paper with China as a target,” Shi Yinhong, director of the America Study Centre at Beijing’s prestigious Renmin University told The Australian.

“China’s response then was very restrained — it didn’t react officially to the paper. But then Chinalco’s failed deal with Rio occurred, the case of the Rio personnel’s arrest, and then (the granting of a visa to exiled Uighur leader) Rebiya Kadeer. China totally can’t accept Australia’s handling of Rebiya Kadeer,” Professor Shi said.

“There are so many events this year, more than in the past several years. There are domestic political reasons, but the protectionism and intense media coverage of these events has also contributed to the current situation.”

The new gas deal between Gorgon partner Exxon Mobile and Chinese energy behemoth PetroChina and signed in Beijing last night, dwarfs the liquefied natural gas contract the same company inked with Woodside in 2007.

The long-touted Gorgon project, which is a three-way partnership between global energy giants Chevron, Shell and Exxon, is expected to cost $65bn to develop and reap $300bn in gas sales for its owners — resulting in a $40bn tax windfall for Australian taxpayers. China has no equity in the project as part of its deal.

Gorgon is now within a “hair’s breadth” of getting off the ground, Mr Ferguson said.

The only remaining issue is the ecologically diverse nearby Barrow Island, where Gorgon plans to process its gas and the run-off carbon dioxide and store it underground. Environment Minister Peter Garrett must tick off on the project by September 8. His West Australian counterpart gave his permission two weeks ago.

Last month Exxon inked a $25bn deal with India, taking total commitments for the Gorgon project to about $200bn of an expected $300bn. Mr Ferguson would not comment on the price of the gas which he said was the result of commercial negotiations.

“We treat these negotiations at arm’s length to government but, from an Australian government point of view, working in close co-operation with the private sector, it underpins the investment decisions and export earnings.”

By flying to Beijing to make the announcement yesterday, Mr Ferguson made a show of goodwill towards China, as well as heaping pressure on his cabinet colleague Mr Garrett to follow suit.