Shell and PetroChina have concluded a binding Heads of Agreement for the long-term supply of liquefied natural gas with the primary source being the Gorgon project in Western Australia.

The companies say the HoA constitutes a milestone in the development of LNG supplies to China to provide clean energy supplies to China. It covers the key terms of the transaction and provides that Shell and PetroChina will work together to conclude and execute a detailed LNG Sale and Purchase Agreement before December 2008.

During the 20-year contract term, Shell will sell one million tons per year of LNG to PetroChina. The Shell-PetroChina agreement is conditional upon a final investment decision being taken by the Gorgon Joint Venture Partners.

Documents recognizing this agreement were signed by Jon Chadwick, executive vice president of Shell Gas & Power Asia and Sun Longde, vice president of PetroChina. Present at the signing ceremony were Western Australia Premier Alan Carpenter and Chairman of China's National Development and Reform Commission, Ma Kai.

"Shell is delighted to have secured this strategic agreement with PetroChina, which sets a new benchmark for LNG supplies into China and underlines Shell's commitment to Chinese LNG customers and to the Gorgon project," said Chadwick.