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INTERVIEW-UPDATE 1-Australia says gas deal shows China upside

Published 08/18/2009, 08:35 AM
Updated 08/18/2009, 08:39 AM
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* Deal comes after Rio Tinto row

* Minister expects more uranium deals with China

* Gas project to provide 6,000 jobs

By Chris Buckley

BEIJING, Aug 18 (Reuters) - Australia's major gas deal signed on Tuesday with China showed the potential for economic ties between the two -- despite ructions over Rio Tinto, its Minister for Resources and Energy said.

Speaking to Reuters in Beijing before the signing of the contract for liquefied natural gas from western Australia's Gorgon project, Martin Ferguson said the two nations needed each other to prosper, and he saw opportunities for more Australian resource exports to China, including uranium.

"It's a statement about the nature of our two economies and the fact that Australia is important to China, just like China is important to Australia," Ferguson said of the deal.

"Australia is a resource- and energy-rich nation, and we have a capacity, if we develop our resources, to meet the economic needs of China."

Canberra said U.S. major ExxonMobil Corp signed a deal to sell liquefied natural gas from its share of an LNG project in Australia to PetroChina in a deal worth about A$50 billion ($41.29 billion), the biggest ever trade deal between the two nations.

For a FACTBOX on the Gorgon project double click on

Ferguson's upbeat words were a jolting contrast with weeks of friction between Canberra and Beijing over Stern Hu, an Australian national and iron ore manager for Rio Tinto, the Anglo-Australian mining giant.

Hu was detained and then arrested in China, accused of stealing business secrets. Three of Hu's Chinese colleagues were also arrested.

Ferguson said he would discuss the Rio case in a "normal, diplomatic way", if the case came up in meetings with Chinese officials.

Earlier on Tuesday Australia said Beijing had scrapped a visit by Vice-Minister for Foreign Affairs He Yafei because Canberra gave a visa to exiled Uighur leader Rebiya Kadeer, who Beijing says instigated deadly ethnic riots in Xinjiang.

She has repeatedly denied the accusation, and Australia has said there is no evidence she is a terrorist.

"I think the ExxonMobil contract indicates that from time to time there are tensions in the diplomatic relationship, but commercial activity goes on," said Ferguson.

The gas agreement, he said, also showed the potential boon for Australia if it can unlock more deals to fuel China's future decades of growth.

"Australia's got a very strong trading relationship on resources and energy with China, be it across LNG, coal, iron ore and the emerging one of uranium," said Ferguson.

MORE URANIUM DEALS LIKELY

Last year, uranium miner Energy Resources of Australia Ltd (ERA) began shipping uranium to China to power nuclear energy plants. Ferguson said more such agreements were likely, including potential for BHP-Billiton.

"I expect our uranium exports to China will also grow....The uranium industry is a developing market in Australia."

China, he added, was "no doubt not just looking to ERA but also BHP Billiton and other uranium miners in Australia to supply uranium to China."

Chinese negotiators were also locked in tortuous talks with Rio Tinto and BHP Billiton over the pricing of iron ore imports to China

Australia's opposition parties have criticised the centre-left Labour government for its handling of the Rio Tinto case and ties with China, saying that the case has shown Prime Minister Kevin Rudd's inability to sway Beijing, despite his past as a Mandarin-speaking diplomat.

Ferguson said he expected the opposition would welcome the gas deal for creating jobs and bringing in export earnings, and he indicated the government would use the agreement to promote its economic credentials.

The gas project could employ up to 6,000 Australian workers at the peak of construction, "buy about $30 billion worth of Australian goods and services over the next few years," and provide gas for consumers in West Australia, he said.

Further development of the Gorgon gas field "has the potential to represent for Australia 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," he said. ($1=1.211 Australian Dollar) (Reporting by Chris Buckley; Editing by William Hardy)

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