The Real Deal on PetroChina's Purchase of Australian Liquified Natural Gas

China’s president signed a 20-year agreement between PetroChina and Royal Dutch Shell in Perth yesterday for liquefied natural gas from Western Australia (Financial Times, Sept 5, 2007).

The FT says that “the move was motivated by the fact that power production is far ahead of this year’s first-half GDP growth of 11.5 percent, and rising pressure to reduce greenhouse gas emissions.”
LNG is a more expensive fuel. Also, soaring energy needs mean that long-term supplies must be secured.

The fact remains that China baulked at going through with an LNG deal five years ago, also with Australia, because the prices were too high (FT, Sept 5, 2007)

They still are. So what is the real deal ?

The change in stance is of course welcome, considering that China has until now not been overly accommodating when it comes to cutting back on green-house gas emissions.

Taking a cynical point of view, could guaranteeing long-term needs be the overriding priority ?

China has of course a lot of coal to burn, sources it for most of its energy requirements, and is slated to overtake the U.S. this year as the world’s largest emitter of greenhouse gases.

And supplies of other energy sources have definitely become more volatile and unreliable in a scene of shifting geo-politics.

Nobody said that environmental protection must be motivated by purely altruistic considerations.

Hedging risks from a long-term point of view to sustain GDP growth – shorn of all pretty notions of sustainability - is not a shabby idea, especially if it yields positive externalities like the reduction of greenhouse as emissions.