Howard faces balancing act over China

Australian Prime Minister John Howard, keen to boost ties with an increasingly powerful neighbour, promised China yesterday his country would be a reliable supplier of the energy it needs to fuel growth.

Speaking at the unveiling of the country's first receiving terminal for liquefied natural gas, which will get its supplies from Australia's North West Shelf project under a US$19 billion deal, he drew an unspoken comparison with regional competitors for China's investment.

"Australia is a stable, reliable, competitive supplier of energy. We deliver our commodities on time, we deliver them safely, we deliver them according to the prearranged agreed price," Howard told journalists on his ninth visit to China.

Beijing has been arguing with Indonesia over the cost of gas for a second terminal in Fujian province, because of steep rises in global markets since the two agreed an initial price.

The maiden terminal in the southern city of Shenzhen - controlled by the state parent of listed CNOOC and indirectly invested in by BP - will supply the south and Hong Kong and is the first of about a dozen proposed or approved terminals along the country's coast.

China wants to more than double the use of gas by 2010, hoping to lessen reliance on oil from politically volatile areas, and on dirty-burning coal. But soaring LNG prices have meant Chinese majors have failed to pin down any further supply deals.

The 25-year contract to supply the Shenzhen terminal is Australia's largest ever trade deal and both countries hope it will be followed by more, allowing China's voracious companies to tap into Canberra's rich resources.

Trade is likely to expand to over US$30 billion this year from US$27 billion last year, Chinese Premier Wen Jiabao said.

The two sides recently signed a nuclear safeguards deal that set the stage for huge uranium exports to Beijing, and are negotiating a free trade agreement. China is already Australia's number two trading partner.

But Howard faces a delicate balancing act as he works to bolster Canberra's relationship with Beijing, while maintaining close links with the United States, which is more wary of China's growing economic might.

- REUTERS