Australia-based LNG Pty, BP Gas in Indonesia and Qatar's Ras Laffan Co were selected for further negotiations over contracts for China's LNG terminal, said Zhen Bing, spokesman for CNOOC, which is the major Chinese backer for the project.

They will compete to supply 3 million tons of LNG annually for 25 years to feed China's first LNG reception terminal in South China's Guangdong Province. CNOOC and Britain-based oil giant BP led the construction of the terminal which will turn the imported LNG back to gas.

Sources said two of the three suppliers would be finally rejected by the middle of this year.

The shortlist -- scheduled to be completed last November -- has been delayed for some reason.

"It (The delay) is understandable, because it is the first time China has constructed such a project. The delay has no impact on our bidding," said Alf D'Souza, vice-president of Australia LNG's Beijing office.

CNOOC invited seven potential suppliers from Australia, Indonesia, Iran, Malaysia, Qatar, Russia and Yemen for the bidding.

Australia LNG, which groups six majors including Shell, Chevron and BP, would sell their gas from the Western Australia's North West Shelf, the largest gas reserves in Australia.

Indonesia plans to sell the LNG from Tangguh in which BP has shared interest, while the Qatar company markets gas from the North Field in the country.

D'Souza said the project is of great economic and political significance to China and Australia.

"This year marks the 30th anniversary of the establishment of the diplomatic relationship between Australia and China. Both Australian and Western Australian governments are eager to see Australia LNG win the contract to deepen the bilateral relationship," D'Souza said.

Sources said the Chinese Government favours those firms with competitive gas prices, stable long-term supply, contract flexibility and various cooperation opportunities, including allowing Chinese companies to take equities in supply fields.

Australia LNG and the Indonesian State Oil Company said they were willing to give up stakes in their gas fields to Chinese companies, in exchange for the supply contract.

Last November, CNOOC Ltd, a spin-off of CNOOC, inked an agreement with Australia LNG on establishing a joint venture to develop natural gas in Australia.

But if Australia LNG fails to win the bid, then the joint venture deal will terminate.

Wei Liucheng, chairman of the company, said: "CNOOC has long expressed a desire to secure assets for LNG imports."

The LNG project fuels China's appetite for consumption of gas in a bid to alleviate the heavy reliance on oil imports and improve the environment, especially along its prosperous coastal regions.

It aims to increase gas consumption to 6 percent of all fuel used by 2010 from the current level of 2 percent.

(China Daily January 23, 2002)