ug. 19 (Bloomberg) -- Exxon Mobil Corp.’s $41 billion deal to supply PetroChina Co. with liquefied natural gas may do more than boost the Irving, Texas-based company’s balance sheet. It may also ease increasingly tense Chinese-Australian relations. Exxon, the world’s biggest publicly traded oil company, yesterday agreed in Beijing to sell 2.25 million metric tons a year of LNG for 20 years from Australia’s Gorgon project. Australian Resources and Energy Minister Martin Ferguson said the agreement was a “landmark in our relationship with China.” The deal was signed hours after Australian Foreign Minister Stephen Smith said difficulties in ties with China following the detention of Rio Tinto Group executives and a visit by Uighur leader Rebiya Kadeer must be managed carefully, and the countries have a “productive economic relationship.” Yanzhou Coal Mining Co.’s A$3.5 billion ($2.9 billion) bid last week for Australia’s Felix Resources Ltd. shows business ties remain unaffected. “The long-term interests of the two countries will always trump the occasional crisis,” said Michael McKinley, professor of global politics at the Australian National University in Canberra. “China’s interest is in obtaining resources at the right volume and price and it’s able to do so in Australia.” PetroChina shares fell 1.2 percent to HK$8.46 in Hong Kong trading today, compared with the 1.7 percent drop in the benchmark Hang Seng Index. Exxon declined 0.1 percent to $66.49 in New York yesterday. Rio, Kadeer Tensions arose after Rio rebuffed a $19.5 billion investment by state-owned Aluminum Corp. of China in June. That prevented the Australian government from having to decide whether to allow the transaction, which was under attack because of concerns the nation risked losing ownership of its minerals. China’s detention last month of Stern Hu, an Australian passport holder, and three other Rio executives for allegedly stealing commercial secrets initially tested ties between the countries. China made “very strong representations” to Australia not to allow Kadeer to visit last week and canceled Vice Minister He Yafei’s attendance at the Pacific Islands Forum and Australia-China dialogue in Cairns earlier this month, Smith said yesterday. The Exxon-PetroChina “deal, together with Yanzhou Coal’s acquisition of Felix Resources, further proves that the business relationship between China and Australia has not been affected by the Rio Tinto case,” said Niu Li, a senior energy researcher at the State Information Center, a government think tank, in Beijing. “The LNG supply agreement will help China meet its rising energy needs.” China LNG Plans Exxon gave no pricing details on the contract, which Ferguson said was worth about A$50 billion ($41 billion), Australia’s biggest business deal. PetroChina Chairman Jiang Jiemin and Ferguson witnessed the signing of the supply agreement yesterday in Beijing yesterday, the company’s parent China National Petroleum Corp. said in a statement on its Web site today, without stating the value. China, which received its first LNG cargo in May 2006, plans to build more than 10 terminals on the east coast to meet a government target to double the use of natural gas in five years by 2010. PetroChina will start operating its first LNG receiving terminal in Jiangsu province in April 2011, the State-owned Assets Supervision and Administration Commission in Beijing said on March 13. The company also plans to construct a terminal in Dalian city in the northeastern province of Liaoning and another in Tangshan in Hebei province. “PetroChina can’t meet future demand for gas with supplies in China, so it needs to look overseas,” said Wang Aochao, an analyst at UOB-Kay Hian in Shanghai. “This is a sizeable and significant deal.” India LNG Deal The agreement with PetroChina comes a week after Western Australian Premier Colin Barnett said India had signed a deal to purchase 1.5 million tons a year of LNG from the Gorgon project. Chevron Corp. and its project partners Exxon and Royal Dutch Shell Plc may give final approval to the Gorgon project in August, JPMorgan Chase & Co. said in June. Exxon, which holds 25 percent of the project, said in its statement yesterday that a final investment decision is anticipated “later this year.” Barnett has estimated the value of the Gorgon project at A$50 billion, while Chevron hasn’t confirmed or denied the figure. The governments of Australia and the state of West Australia on Aug. 17 agreed to pay any costs involved in capturing and storing carbon dioxide emissions from Gorgon. The decision, which Prime Minister Kevin Rudd said cleared a major hurdle for the project, will allow the operators to capture CO2 emissions from the gas fields and store them in geological formations 2 kilometers under Barrow Island. Gorgon Project The Gorgon project will guarantee a significant boost to Australia’s export income with contracts to sell around A$300 billion worth of LNG to customers in the Asia-Pacific region over the next 20 years, Ferguson said. The Gorgon LNG project will be “the biggest single investment ever made in Australia, breaking the record set only a few years ago by the A$12 billion Pluto LNG project now under construction in Western Australia,” Ferguson said yesterday. Woodside Petroleum Ltd.’s Pluto project is on schedule to deliver LNG to customers in 2010, the Perth-based company said last month. LNG is natural gas that’s chilled to liquid form for transportation by ship to destinations not connected by pipeline. The Gorgon project still needs final environmental approval from the Australian government. Last night’s announcement of the Exxon deal by Ferguson left Australian Environment Minister Peter Garrett with no choice but to approve it, Greens Deputy Leader Christine Milne told reporters. “Who in the country would believe for a minute that Peter Garrett is going to say that the environmental considerations outweigh the economic benefits to the nation?” Milne said. “What Martin Ferguson and the government have done is once again wipe their boots on the minister for the environment.” Finance Minister Lindsay Tanner said today the Gorgon project is likely to get government approval once it obtains pending environmental clearances. To contact the reports responsible for this story: Jason Scott in Perth at jscott14@bloomberg.net;

Source