OREANDA-NEWS. May 27, 2013. China's largest oil and gas producer and distributor PetroChina has dropped its USD185 million bid for Australia's coal-seam gas company WestSide Corp.

PetroChina told WestSide that it withdrew its non-binding offer, submitted in November, "because the general situation in Australia has changed so much," The Australian reported Wednesday.

WestSide Executive Chairman Angus Karoll said PetroChina hadn't provided details for dropping the bid, which he said occurred after WestSide gave the Chinese company a deadline to make a decision.

But Karoll surmised what led PetroChina to its decision.

"You're seeing a lot of reports about changing costs, environmental issues, exchange rates and increased regulations in Queensland," Karoll told The Australian.

PetroChina's decision comes ahead of an expected gas shortage in Queensland that is expected to boost gas prices. "This means there are other potential buyers for the gas," says the report.

"Over the past 12 months, the company has observed increasing shortages of gas for Queensland's LNG projects and to satisfy domestic demand," WestSide said. "Recently completed gas sale agreements by other parties and proposals received by the company indicate a material firming in gas prices over the past six months."

Australia's resources sector has been plagued by rising labor costs, infrastructure bottlenecks and the strong Australian dollar.

PetroChina had intended for the gas from WestSide to supply a small planned LNG operation at Fisherman's Landing in the Port of Gladstone, Queensland, being built by Australia's LNG Ltd.

When LNG Limited sold 20 percent of its shares to the engineering unit of China National Petroleum Corp., the state-backed parent of PetroChina in 2011, the Chinese agreed to provide all engineering, procurement and construction services for Fisherman's Landing, The Wall Street Journal reported.

LNG Limited Managing Director Maurice Brand said PetroChina's withdrawal from the takeover talks with WestSide was "an unexpected development, particularly given the lengthy period of the due diligence process and negotiations."

"While LNG Limited is disappointed at PetroChina's withdrawal from the WestSide acquisition, LNG Limited now intends to pursue the option of gas supply directly from WestSide due to the location and quality of their resource," LNG said in a statement Wednesday.

PetroChina in March said that it was looking to make more deals in Australia.

"As one of the key markets in our Asia and Pacific operations, PetroChina is willing to expand our presence in Australia when a good opportunity arises," Mao Zefeng, a PetroChina spokesman, told Bloomberg.