Australian minister optimistic to win China LNG contract

Australia is optimistic about its chances of winning a major liquefied natural gas contract in China but the Chinese have criticized the diverse makeup of Australia's consortium bidding for the contract, Industry Minister Ian Macfarlane said Friday.

"I wouldn't like to pick the outcome," he told Dow Jones Newswires in an interview. "I've got a lot of admiration for the Chinese as business people. They are certainly giving us a fair old thumping."

Final bidding for the contract closes April 19 and a succession of government ministers, including Prime Minister John Howard, have visited or will visit China shortly to boost Australia's chances in winning the deal.

Australia's Northwest Shelf gas project is one of three suppliers on a shortlist to provide three million metric tons a year of LNG from 2005.

The long-term contract to supply gas to an import terminal in southern China is valued around A$750 million a year.

The other suppliers are in Qatar and Indonesia.

Macfarlane, who visited China last week, said he told the Chinese that Australia is already the "cheapest supplier of gas into Japan."

Also, Australia's LNG "is of exceptionally high energy value," he said. "We understand it to be the highest of the three (suppliers on the shortlist) and significantly higher than the Indonesian product."

Australia is also a reliable supplier with LNG reserves in the Northwest Shelf alone able to supply the Chinese contract twice over, according to the minister.

"The issue then comes down to price and is our contract competitive enough?," he said.

Prime Minister John Howard will visit China next month to "further emphasize" Australia's case for the contract.

Still, the Chinese told Macfarlane that the six partners in Australia's consortium is a problem.

The North West Shelf project is an equal joint venture between operator Woodside Petroleum Ltd. (A.WPL), Chevron Texaco Corp., Royal Dutch/Shell Group, BHP Billiton Ltd., BP PLC (BP), and Japan Australia LNG - a 50-50 joint venture between Japan's Mitsubishi Corp. and Mitsui & Co.

The joint venture established a marketing group, Australia LNG Pty Ltd., to conduct negotiations.

"They knew that whilst ALNG was the focus, ALNG then had to go away and negotiate with its partners," Macfarlane said. "I don't see it as a significant hurdle but they did raise it."

Asked whether he is optimistic, Macfarlane said he is, given Australia's record.

But "it has got some way to go and I respect the Chinese for being very good business people," he reiterated. (*)