State energy firm Petronas said today it will supply China with liquefied natural gas for the first time in a landmark deal worth RM91 billion (US$25 billion) over 25 years.

Petronas will supply 3.03 million metric tonnes of natural gas annually to China's Shanghai LNG Company Ltd, the Malaysian firm said in a statement.

"This is Petronas' first LNG deal with China. The deal will further enhance the economic ties between the two countries," the oil and gas producer said in a statement.

Malaysian Prime Minister Abdullah Ahmad Badawi said the value of the deal was worth US$25 billion over 25 years, based on current prices.

"It is a very important event for us, it is very significant," Abdullah told reporters, hailing improvements in bilateral relations. "We have scored a number of successes and one of these is the LNG deal."

The deal was unveiled by Abdullah and China's Premier Wen Jiabao on the sidelines of the China-Asean summit in south China's Nanning city.

"Energy is a key cooperation area between the two countries," Chinese government spokesman Qin Gang told reporters in a briefing on contents of the bilateral meeting.

The deal was the latest in a string of natural oil and gas deals for China which is urgently scouring the globe for fresh supplies to power its booming economy and a growing middle class snapping up energy-consuming appliances.

China's reserves low

Abdullah said Wen did raise concerns about energy supply during their bilateral meeting, but that China was interested in developing alternative sources of energy.

"China did not voice any concerns about energy, but China agrees that there should be collaboration in the energy sector, one of which is that we must work for ... alternative energy," he said.

"This is just one of the LNG deals that they need to do," said Albert Kwong, chief of PetroAsian Energy, a consultancy based in Hong Kong advising on Sino-foreign energy tie-ups.

"China's gas situation is really pretty urgent, it's pretty bad," he said, adding that if China were not to ramp up gas imports it would use up its own relatively small reserves by 2020.

In 1996, China's energy bureau called for natural gas production to rise to 25 billion cubic meters and for 70 percent of urban households to use gas fuel by 2000.

Natural gas is much less polluting that the coal which still generates most of China's electricity.

Today, China consumes about 43 billion cubic meters of natural gas per year and experts like Kwong expect that to rise to 113 billion tonnes by 2015.

Major supply deals

China has accordingly pressed ahead on major supply deals with Australia, Indonesia, Iran, Turkmenistan, Russia and Kazakhstan.

In its most recent agreement, China National Offshore Oil Corp (CNOOC) finalized a deal in September worth US$8.5 billion for Indonesia to supply the nation's southeast with 2.6 million tonnes of LNG annually over 25 years.

That deal was originally signed in 2002 but was then renegotiated to adjust for higher energy prices.

Also in 2002, China inked another 25-year accord worth US$18 billion for the supply of 3.3 million tonnes of LNG annually in what was Australia's biggest energy deal.

Petronas said the LNG will be delivered from its LNG Complex in Bintulu, Sarawak to Shanghai LNG's receiving terminal at Zhong Ximentang Island, in Zhejiang Province.

The Shenergy Group, a state-owned energy company based in Shanghai, holds a 55-percent stake in the project, while CNOOC, China's largest offshore oil company, holds the other 45 percent.

CNOOC Gas and Power is a wholly-owned subsidiary of China national Offshore Oil Corporation.