Global Times - 'PetroChina deal with Australia too expensive'

'PetroChina deal with Australia too expensive'

Source: Global Times
[02:34 September 10 2009]
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By Xu Donghuan

Chinese energy giant PetroChina has once again become the target of netizens' ire. They are questioning the high price it paid in a recent liquefied natural gas deal with Australia.

On www.cat898.com, a popular Web forum in China, one netizen named VVVQWE wrote, "The offer varies depending on the buyer, but it's inconceivable that the price has such a huge difference."

On August 18, PetroChina signed a $41.3 billion deal with Australia to purchase 2.25 million tons of liquefied natural gas a year over the next two decades.

The agreement, believed to be the biggest foreign investment in Australia, is expected to create thousands of jobs and pump billions of dollars into the Australian economy.

The deal came one week after US oil and gas giant ExxonMobil signed a $20.5 billion contract with India's Petronet to sell 1.5 million tons of liquefied natural gas annually from the Gorgon project in western Australia for 20 years.

To break it down, the unit purchase price for PetroChina deal is $918 per ton, while Petronet of India only paid $683 per ton.

Another comment posted by a netizen named "Great Sage Equal of Heave" said, "The unit price should be cheaper with a bigger purchase. But PetroChina paid a price 30 percent higher than the Indian company."

Netizens say that if PetroChina paid a similar price as the Indian company, it would have saved the Chinese firm over $10 billion.

Other netizens think the cost of transportation might be a factor in the price difference, as the distance from Australia to China is longer than to India.

However, Liu Binghong, an official from the Shanghai Dalu Futures Co, dismissed this as unlikely. "The one-third price difference cannot be solely due to the distance of transportation," he was quoted as saying by the Shanghai Morning Post.

PetroChina has also been the target of sharp criticism from Chinese netizens for other issues. In July, netizens disclosed that a chandelier inside the PetroChina building cost 12 million yuan ($1.76 million). Earlier this month, media reports said PetroChina is providing huge subsidized housing for its staff, a practice that had supposedly been eradicated in China.