China-Australia LNG deal as Rio Tinto trial ends

[March 24, 2010]  SHANGHAI (AP) -- Australia and China signed a multibillion dollar energy deal Wednesday, pushing ahead with business as the trial of four employees of mining giant Rio Tinto ended in Shanghai without a verdict.

The contract signed in Beijing calls for China's offshore oil and gas company CNOOC to buy 3.6 million tons of liquefied natural gas a year for 20 years from an Australian energy project operated by BG Group PLC.

It is Australia's biggest single company-to-company contract ever, Australia's Resources and Energy Minister Martin Ferguson said Wednesday after witnessing the signing. A figure for the deal wasn't released but Australian media reports estimated its value at Australian dollars 80 billion ($73 billion).

Australia has been ramping up natural gas projects in response to booming demand from China and elsewhere as a less polluting fuel than coal to drive power generators.

The latest in a string of gas supply contracts, the CNOOC deal suggests that Australia and China's commercial ties have been largely unaffected by other tensions, including the trial of Australian citizen Stern Hu, who was head of Rio Tinto's iron ore business in China, and three Chinese co-workers on charges of taking bribes and stealing business secrets.

"It's very clear that right through the difficulties over Stern Hu, we have maintained a healthy business relationship with China that has been mutually beneficial to both countries," Ferguson told Australian Broadcasting Corp. Radio.

Ferguson would not comment on the trial itself.

"Let's leave it till the dust settles and then see what is the appropriate way forward," he told ABC.

The trial, which began Monday, wrapped up earlier than expected Wednesday.

The Rio Tinto case is seen by many working in China as evidence the Communist-ruled government is subjecting foreign companies to increasingly close scrutiny, raising their risks of running afoul of secrecy rules that are themselves kept secret.

Australia urged greater transparency and protested the court's decision to keep sessions of the trial dealing with commercial secrets closed, though its consul-general in Shanghai did attend the sessions on bribery charges.

Australia's Department of Foreign Affairs and Trade issued a statement late Wednesday saying that it had no further comment on the court's proceedings after the trial's end but that consular officials would attend when it announces a verdict.

"The Australian Government will make a considered statement at the conclusion of the trial processes," it said, pledging to safeguard Hu's rights and welfare.

A verdict and possible sentences could come within days, said Tao Wuping, a defense lawyer. He said the business secrets allegedly stolen by the Rio Tinto employees were straightforward commercial information.

"The case is not as complicated as the public may think," said Tao, who nonetheless refused to provide any details on the commercial secrets allegations, citing a court confidentiality order.

Virtually all cases that go to court in China end in conviction.

The four defendants pleaded guilty to charges they took bribes, although they contested the amounts allegedly involved in some cases, lawyers said.

Few details of the allegations against Hu and the others have been released, and none have been allowed to make any public comment since they were detained. Chinese officials have warned against politicizing the case.

Still, the arrests were thought linked to Beijing's anger over high prices it paid for iron ore -- a key commodity in China's booming economy. Rio Tinto, based in London and Melbourne, is one of the top suppliers of ore to China and a key industry negotiator in price talks with China's state-owned steel mills.

Reports Wednesday on the Web site of the Chinese financial magazine Caijing said one of the Rio Tinto employees, Wang Yong, was accused of receiving $9 million from Du Shuanghua, a steel tycoon whose company has chafed at the state-dominated pricing arrangements, setting his own agreements with overseas suppliers.

Staff at Rizhao, which was taken over by a state-owned rival last year against Du's objections, refused comment on the report.

Chinese media reports earlier suggested the Rio Tinto employees may have been caught up in an effort to control information exchanged during the iron ore pricing talks, where Rio Tinto was acting as lead negotiator for the miners.

Negotiations for 2010-2011 shipments face an April 1 deadline, with China urging global miners to ease demands to nearly double prices over last year's rates.

China imported 630 million tons of iron ore last year, up 41.6 percent from the year before, and is complaining that soaring costs are injuring its state-dominated steel sector.

The admissions of bribe taking were a blow for Rio Tinto, which is seeking to undo any damage to its wider business interests. Last week, it announced an agreement with Chinese aluminum giant Chinalco to develop an iron ore reserve in the West African country of Guinea.

[Associated Press; By ELAINE KURTENBACH]

Associated Press reporter Rod McGuirk in Canberra and Associated Press researcher Ji Chen in Shanghai contributed to this report.

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