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First-up win gives ALNG ‘inaugural expert’ status

THE Guangdong contract is the first significant North-West Shelf venture supply deal secured by the project’s marketing arm, Australia LNG.

Negotiations on previous long-term contracts to supply the Japanese market were initiated under the NWS banner, before the marketing arm had been established under the ALNG badge.

Hence, from this deal, ALNG scores international recognition and significant leverage in now chasing opportunities in other Asian destinations, such as South Korea and Taiwan.

International competitive tender pro-cesses, such as the Guangdong one, are uncommon in the LNG industry and, along with its success, ALNG has acquired inaugural expert status.

ALNG, and China, was bare-faced at the beginning of negotiations, but now has a good understanding of the synergies of such deals – of what the Chinese are looking for in terms of a proposal.

On the relationship side, this included a comparatively high-intensity level of personal involvement by government ministers and officials, and the development of relationships within the commercial parties to a level of understanding and comfort deemed necessary for an effective 25-year association.

Of quite significant import was the recognition that the Chinese were looking for much more than a straight supply deal.

Like a recent joint venture and sales deal between the Shanghai Baosteel Group Corporation and Hamersley Iron, the Guangdong sale and supply negotiations have encompassed the opportunity for Chinese energy company CNOOC to become a full member of a joint venture operation to facilitate the supply contract. There’s also the potential for a shipping joint venture that will boost the Chinese shipping construction industry and local employment opportunities.

There is still work to be done on the deal announced last week, and ALNG has much to do within the next three months.

Described as being at the letter of intent stage, negotiations will now be advanced by ALNG with the finalising of commercial contracts.

ALNG will also assist with China’s feasibility study, a virtual integration of all the elements of the winning proposal.

These elements have been described by ALNG vice-president Lou Montilla as “well-defined”.

The result of the feasibility study, a Chinese Government assurance process, will be presented to the Central Government within two months for approval that is considered to be more-or-less a formality, Mr Montilla said.

With the 25-year phase one deal in place and phase two – requiring the supply of a possible extra two million tonnes of LNG per annum – due to commence in 2008, ALNG may supplement its Beijing office with another in Guangdong.

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