Signing of the $30 billion deal to sell liquefied natural gas has coincided with the arrival in Australia by Chinese President Hu Jintao who is also in Canberra to negotiate an extension to the valuable NWS contract.
Currently the exact timeframe and figures attached to the deal have not been released although Jay Johnson, managing director of ChevronTexaco Australia, the operator of the Gorgon Joint Venture, said the agreement with CNOOC is significant as it provides a solid foundation customer and production levels to underpin the commercialisation of the Gorgon gas field.
In a deal similar to that by the NWS partners the Chinese National Offshore Oil Corporation (CNOOC) will buy a substantial stake in the Gorgon development on Barrow Island, off Australia's north-west coast, and buy between 80 million and 100 million tonnes of gas, conditional on the gas project going ahead
Under the NWS deal, CNOOC took a 5.3% stake in the project gas reserves, equal to 1.1 trillion cubic feet of gas. However, the Gorgon agreement goes one step further by enabling the company to become a full equity partner in the project.
CNOOC will also assist Gorgon to secure markets in China for a further designated amount of LNG.
CNOOC is already involved in two LNG receiving terminal projects in China, Guangdong and Fujian. Western Australia's sister state, Zhejiang, is one of several new locations already identified for the expanding LNG trade in China's southern and eastern provinces.
CNOOC's President Fu Chengyu, accompanying the Chinese President on his visit to Australia, said that this deal strongly reinforced the ties of friendship between China and Australia and was a result of the good relations, which had developed over the last few years.
"We look forward to becoming an active and constructive player in the Australian hydrocarbon business as a Gorgon participant", he said.
"CNOOC places great importance on the LNG business in China; gas is a significant growth contributor for CNOOC and securing supplies from Gorgon reinforces that strategy. We are also very conscious that trade at this level plays an important role in promoting stability in the Region".
The Gorgon development received in-principle approval last month from the Western Australian State Government for access to Barrow Island, and a State Agreement has been signed to facilitate the establishment of gas processing facilities on the island.
ChevronTexaco said the Gorgon Joint Venture is focussed on developing the Gorgon gas field while protecting the conservation values of Barrow Island.
WA opposition leader Colin Barnett has added fuel to the fire clouding the projects future by advocating limited use of the Barrow Island environmental reserve for the processing of greenhouse gases suggesting the main LNG plant to be built on the mainland - an idea that Chevron Texaco said would add more than a billion dollars to the project cost.
However, Barnett said that the move onshore would spark increased gas use by associated projects, which will promote increased investment in the state outweighing any escalation in costs involved in moving the project onshore.
Previously the project signed tentative deals for supply to the west coast of the US with both Chevron Texaco and Shell for two million tonnes of LNG per year each for 20 years from 2008.
However, the deals are only letters of intent and MoUs, which some sceptics branded as a ploy to pressure the State Cabinet's decision on approval for the venture.
The Gorgon Joint Venture participants currently consist of ChevronTexaco (4/7 th interest and operator), Shell (2/7 th ) and ExxonMobil (1/7 th ).
