The Australian Prime Minister said China's rapid economic growth entails a great demand for energy, and Australia, which is rich in natural gas and coal resources, serves as a safe, reliable and world-class energy supplier.

John Howard was speaking at a special session on the two countries’ energy futures at the annual Boao Forum for Asia conference on Saturday afternoon in the southern province of Hainan.

He began a working visit to China on Monday. After a meeting with Premier Wen Jiabao in Beijing, the two sides signed a Memorandum of Understanding to formally start negotiations on a free trade area (FTA) following Australia's recognition of China's full market economy status.

Trade between them exceeded US$20 billion last year, and China is now Australia's third largest trade partner, second largest export market and second largest source of imports.

Ma Kai, chairman of the National Development and Reform Commission, said the launch of FTA negotiations would bring new opportunities for further developing energy cooperation.

In terms of its mid- and long-term energy strategy, Ma said it is necessary for China to optimize its energy structure. Currently relying mainly on coal and electricity, it should adopt vigorous measures to exploit oil and gas as well as other new energy resources.

Top priority should be given to energy saving, and negative effects on the environment due to energy exploitation must be reduced to the lowest limit, he said.

Ma stressed that international cooperation in the energy sector will be strengthened while maintaining self-reliance. In recent years, Sino-Australian cooperation has advanced at an encouraging pace and achieved outstanding results.

According to Fu Chengyu, president of the China National Offshore Oil Corporation (CNOOC), his company signed a preliminary agreement with Australia's Greater Gorgon Joint Venture participants in October 2003.

The natural gas in the Greater Gorgon Area fields, located off the northwest coast of Australia, is estimated to be in excess of 40 trillion cubic feet, representing nearly one-third of all known Australian reserves.

The essence of the agreement is for Gorgon to supply China with at least 80 million tons of liquefied natural gas (LNG) over 25 years and to make CNOOC a full equity partner in the Gorgon project, said Fu. Negotiations to transform that agreement into firm contracts continue.

China's demand for LNG is one of the fastest growing in the world. James Johnson, managing director of Chevron Texaco Australia Pty Ltd, predicted that by 2010, China would require 20 million tons of LNG per year to satisfy markets from Guangdong in the south to Shanghai and Zhejiang in the east.

Australia is well placed to meet that demand from both a geopolitical and reliability perspective, Johnson said. Australia has been exporting LNG since 1989. The North West Shelf, Browse Basin and Greater Gorgon developments have helped it establish an enviable reputation for efficiency, reliability and delivery of competitive energy to customers around the world.

There is indeed a vast range of prospects for the two countries' energy cooperation in the future, he said.