SHENZHEN: Premier Wen Jiabao and his Australian counterpart John Howard yesterday jointly inaugurated the first liquefied natural gas (LNG) project between the two countries in South China's Guangdong Province.

Premier Wen Jiabao and Australian Prime Minister John Howard jointly press a button to start the Guangdong Liquefied Natural Gas Project Phase I during a ceremony in Shenzhen's Dapeng Bay yesterday. [REUTERS]

Both hailed the 25-year contract to supply a Shenzhen terminal with gas from Australia as a symbol of blossoming trade between the countries.

The two leaders pushed the start-up button together during a ceremony at Dapeng Gas Terminal in the bustling manufacturing hub of Shenzhen.

"Not only is this deal the biggest ever in Australia's history, it is in every sense a symbol of what can be achieved in the future between our two countries," said Howard.

The 29-billion-yuan (US$3.6 billion) terminal was built to receive LNG shipments from Australia - part of a US$18.3 billion 25-year gas contract finalized in late 2004.

Wen said the deal "marked a very big, very good beginning to stable, long-term supply-and-demand relations" between the two countries.

The deal is Australia's single biggest resource contract and is China's first LNG-import project. Deliveries began a month ago.

The Shenzhen facility, operated by China National Offshore Oil Corp, is the first of 16 planned terminals in coastal area for receiving LNG.

The plants convert the fuel from liquid into gas form, which is then piped to consumers, industries and power plants.

Under the contract, Australia will provide 3.7 million tons of LNG annually, which will supply cities of Shenzhen, Dongguan, Guangzhou, Foshan and Huizhou in Guangdong, and Hong Kong.

A senior Chinese official said the two nations were already in talks over supplies for Guangdong's second LNG terminal.

China-Australia exchanges and collaboration have become more active than ever before, Wen said.

"We are willing to continue high-level exchanges with Australia, enhance strategic dialogue, and actively promote free trade negotiations," he said.

Beijing and Canberra are now discussing a free trade agreement and in April, Wen announced that the two countries had agreed to strive for a deal within the next two years.

Howard told reporters in Shenzhen on Tuesday that free trade negotiations with Beijing are "going quite well" but the two nations would remain close economic partners even if a formal deal isn't struck.

"I am on the optimistic side but... whether we sign a free trade agreement with China or not, we have a super-duper economic relationship with this country.

"The world has much to benefit from a fully and openly engaged China and we welcome without any trepidation the economic involvement of China in the globe," Howard said.

Wen said China was ready to expand partnership with Australia in the energy sector.

"China and Australia want to strengthen co-operation ranging from the energy, mining and resources sectors to upstream exploration, new energy, renewable energy, clean energy and safe production."

Howard assured his Chinese host that Australia would be a reliable supplier of the energy China needs to fuel growth.

"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 agreed price," Howard said.

Trade is likely to expand to more than US$30 billion this year from US$27 billion last year, Wen said.

China is already Australia's No 2 trading partner. The two sides recently signed a nuclear safeguards deal that set the stage for huge uranium exports to Beijing.

Howard is on a three-day working visit that started on Tuesday.

Leaders optimistic on Sino-Australian FTA talks

Both the Chinese premier and the Australian prime minister have expressed their hopes of accelerating talks on a free-trade agreement yesterday in the southern city.

The sixth-round negotiation of the Sino-Australia FTA will be held in Beijing in early September, tackling substantial issues such as bidding and offering. Talks began last May.

"We have agreed to speed up the free trade area (FTA) negotiations," Premier Wen Jiabao told reporters after a one-hour meeting with Australian Prime Minister John Howard.

"Both sides are very sincere I believe Chinese and Australian trade will both benefit," he said.

Liao Xiaoqi, vice-minister of commerce, said the Chinese and Australian FTA delegations are working hard to reach a balanced agreement in one or two years. "We are quite confident," he told an FTA seminar.

Given that both countries have different economic structures and are at different development stages, problems are inevitable, especially in agricultural trade, the service industry mode and the openness of investment, Liao said.

"We believe all issues concern both sides and could be discussed at the negotiating table Only with an open and active attitude and full consideration and understanding of the difficulties of each party, can we finally make a breakthrough and reach a win-win FTA agreement," he said.

Howard said the negotiations are going well and he is optimistic about them.

He said Sino-Australian trade has made remarkable achievements even without the free-trade agreement.

"What we should remember is that whether we sign a free trade agreement with China or not we have one super economic relationship with this country and the quadrupling of exports over a period of 10 years is a pretty remarkable achievement," he said.

He also agreed that there are some important issues to be addressed and hoped the industries of both countries are able to understand the corresponding situations.

Howard said he hoped China would put forward concessions on Australian access to its agriculture and services. He said Australian trade negotiators would reciprocate with similar concessions in manufacturing.

He noted that Australia was very keen to export far more natural resources to China, where energy and commodity use is going to continue to surge as the nation's 1.3 billion people grow wealthier.

However, he stressed Australia's economic relations with China should be viewed more broadly than just the resources sector.

"The service sector has certainly got enormous opportunities and I think we should see the relationship in a very broad manner; for example, the financial service, education and even in manufacturing, and not just see it in terms of coal, iron ore and gas," he said.

China has been the second-largest trade partner of Australia and second-largest export destination of Australia after Japan.

The trade between the two countries reached US$27.3 billion in 2005, up 33.6 per cent from a year ago.

In the first five months of this year, the trade volume rose 17.4 per cent year-on-year to US$11.7 billion, according to official figures.