A sign of PetroChina in Henan province [Photo: Baidu]

China's top oil and gas producer has struck a deal with Europe's largest oil company to buy liquefied natural gas (LNG) from Australia, to meet the country's soaring demand for clean fuel.
PetroChina International Co Ltd, a branch of PetroChina, and Shell Eastern LNG signed a long-term supply agreement for LNG from the Gorgon project in Western Australia, Shell said on its website yesterday.

Shell and PetroChina will draw up a detailed LNG sale and purchase agreement by the end of next year, according to Shell's statement.

"Details such as price of delivery are still to be agreed, but the deal will certainly boost China's clean energy supply," said Han Xiaoping, an independent analyst with energy portal China5e.com.

Han said the deal could also give PetroChina scope to get involved in upstream gas exploration and production on the Gorgon project.

"PetroChina could use its established natural gas distribution networks in China to great effect if it can get involved in upstream production at Gorgon," said Han.

Shell's Beijing office was not available for comment yesterday.

However, Jon Chadwick, executive vice president of Shell Gas and Power Asia, said the deal "sets a new benchmark for LNG supplies into China and underlines Shell's commitment to Chinese LNG customers and to the Gorgon project."

Shell will sell one million tons per annum of LNG to PetroChina during the 20-year contract, Shell said.

The Shell-PetroChina agreement is conditional upon a final investment decision from the Gorgon joint venture partners.