North West Shelf to supply spot LNG cargoes to Kogas

Australia's North West Shelf signed a short-term liquefied natural gas (LNG) contract with the Korea Gas Corporation (KOGAS) on Tuesday, which could pave the way for a larger supply deal with the Asian nation.

Woodside Petroleum Ltd , operator of the North West Shelf venture, said the 220,000 tonne contract will consist of one spot cargo and three cargoes redirected from existing contracted customers where they are surplus to requirements.

Woodside declined to name which customers had surplus LNG.

Market sources said that under long-term contracts to Asian customers an LNG cargo is traditionally worth around $20 million, while spot cargoes generally tend to be a bit cheaper.

"This is a significant step in developing our relationship with Kogas and we hope this will foster further long term LNG business with Korea," Arthur Dixon, president of the North West Shelf's marketing arm Australia LNG, said in a statement.

KOGAS, South Korea's sole importer and wholesaler of LNG, is seeking two million tonnes of term LNG to meet growing demand.

A company source told Reuters last week that bids were invited in late September for mid-term supply contracts ranging from five to possibly 10 years.

South Korea -- the world's second-largest LNG importer after Japan -- needs an additional supply of 1.8 million tonnes of LNG next year and, without new contracts, the shortage is expected to rise to two million tonnes in 2004.

KOGAS has long-term supply contracts for a total of 16.9 million tonnes of LNG a year with Indonesia, Malaysia, Oman, Brunei and Qatar.

"We view this short-term agreement as a platform for further discussions," a spokesman for Woodside told Reuters.

"We have supplied KOGAS with about six spot cargoes of LNG since 1989 and we would certainly be keen to build those relationships further through medium to long-term LNG supply arrangements."

Other shareholders in the North West Shelf are units of Royal Dutch/Shell , BP Plc , Chevron Texaco and BHP Petroleum Pty Ltd , and Japan Australian LNG (MIMI) Pty Ltd .

The North West Shelf currently supplies 70 percent of Western Australia state's domestic gas demand and about 10 percent of Japanese LNG demand.

The venture also recently won a A$25 billion contract to supply three million tonnes of gas annually over 25 years from 2005/06 to China's first LNG terminal. (*)