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FWN Financial News: NW Shelf China Gas Deal Burns A$20 Billion

By Dow Jones Newswires
SYDNEY (Dow Jones Commodities News via Comtex)
A landmark gas contract with China stands to cost Australia's biggest natural resources project up to A$20 billion (US$14.3 billion) in lost sales due to contractual terms that fail to account for the increase in oil prices to record levels, the Australian Financial Review reported Friday.
The 25-year gas contract between China National Offshore Oil Co. and the North West Shelf Venture was struck at prices that are half those enjoyed by project operator Woodside Petroleum on other major contracts, the paper said.
The 2002 liquefied natural gas contract doesn't contain clauses allowing the six North West Shelf partners to alter prices in line with changes in the oil price, potentially costing A$3.5 billion (US$2.5 billion) in lost revenue over the next six years alone, it adds.
Details of the price of the contract haven't been released by the North West Shelf partners, but analysts have now been able to piece together just where the LNG was priced, the report says.
The North West Shelf partners are Woodside, BHP Billiton, BP, Chevron, Shell, and Japan Australia LNG, which is an equal joint venture between Japan's Mitsubishi Corp. and Mitsui & Co. CNOOC is also a member of the venture but doesn't have an interest in the North West Shelf's infrastructure.
Copyright (c) 2006 Dow Jones & Company, Inc

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