To make things worse, the signs are that additional orders will go the same way as China builds up its LNG fleet and Japan and Korea are confronted with stiff price competition from Chinese builders due to cheap labour.

With the Chinese government keen to increase the country's dependence on gas to about 6% of total energy consumption by 2010, it is expected that up to seven LNG carriers will be required to support delivery.

The first tankers off the rank will be used for gas delivery to the country's first LNG terminal in the Guangdong province from Australia's NWS.

The contract was awarded last December to China's Hudong-Zhonghua Shipyard in Shanghai who tendered a bid around $US10 million lower than the international average of $US160 million for a 145,000 cubic metre vessel.

The contract for the two tankers was signed by China Merchant Holdings, China Ocean Shipping Co. (COSCO), which owns China's largest tanker fleet, and Australia's NWS venture.

COSCO and China Merchants Group will jointly hold a 51% stake in the vessels, with the remainder held by LNG supplier Australia LNG Co and local Chinese shareholders.

Under the contract, Hudong-Zhonghua will have an option to build a third LNG tanker, to accommodate increased LNG imports from Australia to Guangdong after 2008.

Now China is preparing to invite bids to build additional LNG carriers, for its second LNG terminal just approved for construction by the government in Fujian province.