China's second largest oil company, Sinopec Corp, yesterday signed its first purchase deal for liquefied natural gas (LNG) with US oil major ExxonMobil, in a move to expand its share in the rapidly growing domestic gas market.

The two companies entered into a preliminary agreement for the long-term supply of 2 million tons per annum of LNG from ExxonMobil's project in Papua New Guinea. The two sides are working together to finalize a binding sale and purchase agreement this year, Sinopec yesterday said in a statement.

The LNG will be supplied to Qingdao, Shandong province, where Sinopec will build an LNG receiving terminal, Wang Zhigang, senior vice-president of Sinopec Corp, said yesterday.

Analysts said the deal marks a milestone in the company's expansion into the domestic LNG market. At present, the market is dominated by the country's leading oil and gas producer, PetroChina, and the country's leading offshore oil company, CNOOC.

China's LNG imports rose to a record, of around 800,000 tons in September. Analysts said the figure would remain high during the rest of the year due to growing demand.

With this agreement, the ExxonMobil-led LNG project developer will conduct exclusive discussions with Sinopec and other major Asian LNG customers for binding sale and purchase agreements covering its full project capacity, said Ron Billings, marketing vice-president of ExxonMobil Gas and Power.

Other potential gas buyers include Japan's Tokyo Electric and Osaka Gas Ltd.