OREANDA-NEWS. April 29, 2011. CHINESE oil and gas giant Sinopec has provided a big vote of confidence in Origin Energy and ConocoPhillips' Australia Pacific LNG project by paying a big premium for a 15 per cent stake in the project.

Sinopec (China Petrochemical Corporation) has finalised a 4.3 million tonnes a year gas contract with the project, worth USD 90 billion over 20 years, making it the largest single liquefied natural gas contract in Australia.

The deal will underpin APLNG's initial processing plant and Sinopec will pay Origin and Conoco USD 1.5 billion for its equity interest.

That compares with the USD 665 million that Korea Gas and France's Total group recently paid for a 15 per cent interest in the Santos-led Gladstone LNG project, which like APLNG is destined to be built on Curtis Island in Gladstone Harbour.

Origin chief executive Grant King told reporters the high price had been achieved because of the ``high quality'' of the APLNG project which, analysts agree, is underpinned by the largest coal seam gas reserves held by a company in Australia.

The purchase of the stake by Sinopec reduces Conoco and Origin's holdings in APLNG, which is aiming to ship its first gas in late 2015 or early 2016, to 42.5 per cent each.

But those stakes may well be reduced further, as further contracts with gas buyers are signed.

The Sinopec deal underpins only the first of APLNG's planned two foundation LNG processing units or ``trains''.

But Ryan Lance, Conoco's senior vice-president for exploration and production, said other potential customers were showing keen interest in buying LNG from the venture, particularly since March's massive earthquake and tsunami shook confidence in Japan's nuclear power industry.

``Since the tragic events in Japan, gas is going to be in greater demand in the Asia Pacific region, and we're finding that with the customer interaction that we have today.''

Deutsche Bank has forecast that APLNG's upstream, pipeline and two train Curtis Island development will cost USD 18.5 billion, though Origin and Conoco have not put an official estimate on the project.

Mr Lance said  despite many analysts' fears that the cost of planned Queensland LNG plants will inevitably blow out  APLNG was confident it could bring its project in on budget.

The Sinopec deal was another example of Australia's growing trade relationship with China, said Federal Resources Minister Martin Ferguson, who witnessed the signing of the deal.

``China is Australia's second-largest customer for LNG and this deal with Sinopec brings new and existing LNG contracts with China to over 15 million tonnes per annum.''

APLNG is expected to have a total production capacity, from its two trains, of about 9 million tonnes, which with Santo's plant, and that to be built by BG Group, should take production on Curtis Island to about 26 million tonnes.

Origin and Conoco are expected to give the green-light on APLNG's development by mid-year, paving the way for construction to start on the project which at its peak will employ an estimated 6000 people. It will create a further 1000 ongoing jobs from 2015-16, when it comes on stream.