Energy giant PetroChina Co Ltd has pulled out of a $40 billion deal to buy natural gas from a project off Australia, but Chinese analysts and officials yesterday tried to play down the impact on the Chinese market or bilateral relations.

Australia's second largest oil and gas producer Woodside Petroleum Ltd informed Australia's stock exchange on Monday that an early stage agreement for the Browse Basin liquefied natural gas (LNG) project off Western Australia state had not been settled by a Dec 31 deadline and had now lapsed.

Under the September 2007 agreement, PetroChina would have potentially bought up to 3.3 million tons of LNG per year for up to 20 years.

At the time, it was one of Australia's largest export deals worth an estimated A$45 billion ($40 billion).

"I don't think it will hurt the domestic market. The growth momentum in China's natural gas market will continue," Dong Xiucheng, professor at China University of Petroleum, said yesterday.

Foreign Ministry spokeswoman Jiang Yu said she was not aware of the specifics of the issue, but stressed that the economies of China and Australia are complementary, and promoting trade and investment serves the common interest of both countries.

PetroChina said last night that a delay in the development of the Browse project was the major reason behind the lapse of the deal.

Some analysts also said it was probably because PetroChina had become dissatisfied with the cost in the two years since the deal was signed.

The lapse of the deal means that the terms, including price, for a large chunk of Browse Basin gas are once again fully open to negotiation.

"The deal was good at the time, but in the past two years, things have been changing rapidly," said Peter Kopetz, energy analyst with Western Australia-based State One Stockbroking.

Natural gas prices peaked in the middle of 2008, but have been on a decline since then, tumbling more than 50 percent.

PetroChina would probably look for other sources of gas, said Yang Wei, an oil industry analyst at Guotai Junan Securities in Shanghai.

"I think it's probably because the price is not right. It's too high," he said.

Woodside and PetroChina "have agreed to keep each other informed of progress in their respective LNG export and import projects," Yvonne Ball, the Australian company's spokeswoman, told China Daily yesterday.

China is a leading LNG importer, but the country should diversify its import sources to find more sustainable supplies, analysts said.

Han Xiaoping, chief information officer of China5e.com, a leading energy website in the country, said China "can find other sources of supplies to meet the rising demand".

He urged the government to pay more attention to exploration and development of domestic natural gas fields.

"Relying too much on imports may hurt our energy security," he added.

As a source of clean energy, natural gas accounts for only about 3 percent of China's total energy consumption. Globally, the figure is about 25 percent,

China's natural gas production will hit 120 billion cu m in 2011, a target set by the National Energy Administration (NEA) last year.

According to a report by the International Energy Agency (IEA), China could be dependent on imports for more than one-third of its total natural gas consumption by 2030.

The country, which received its first LNG cargo in May 2006, plans to build more than 10 terminals on the east coast to meet a government target of doubling the use of natural gas in the five years to 2010.

The country hopes to clinch more deals on LNG imports and speed up construction of LNG terminals, gas pipelines and storage facilities this year, NEA head Zhang Guobao was quoted as saying by China Energy News on Monday.

Compared with other fossil fuels, China's natural gas market will see rapid development, as the consumption of clean energy fits well with the country's efforts to build a more environmentally-friendly economy, said Dong with China University of Petroleum.

The growth is more visible in more developed areas, as they strive for better environmental protection, he added.

For instance, in Guangdong, one of the richest areas in China, natural gas-fired power generation is regarded as a promising industry, said Zhuang Rongjin, director of the gas department affiliated to the Guangdong Oil and Gas Association.

At present, imports account for 80 to 90 percent of Guangdong's natural gas consumption, he said.