Shell Eastern LNG and PetroChina International Company 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 agreement 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 annum of LNG to PetroChina. The Shell-PetroChina agreement is conditional upon a final investment decision being taken by the Gorgon Joint Venture Partners.

Jon Chadwick, executive vice president of Shell gas & power Asia, said: 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.