The Australian Financial Review reported today that the 25-year gas contract signed in 2002 did not contain clauses that would allow the six equal NWS partners – Woodside Energy, BHP Billiton, BP, Chevron, Japan Australia LNG and Shell – to alter prices in line with changes in the oil price.
This would potentially cost the venture about $3.5 billion in lost revenue over the next six years and up to $20 billion over the next 25 years if the LNG market prices remained high, the newspaper calculated.
The contract, which is for the delivery of 3.3-3.7 million tonnes of LNG a year to China, locked in a fixed price of Australian LNG against an oil price at the low end of the LNG price cycle of about $20 per barrel.
As part of the deal, CNOOC also acquired a 5.3% stake in the NWS project.
Australian firms have been unable to sign any subsequent deals with Chinese buyers. The Chinese have baulked at paying curent market prices.
