MELBOURNE, Nov 25 (Reuters) - Queensland Alumina Ltd said on Tuesday it expected to soon sign a long-term gas deal with the ExxonMobil Corp -led $3.5 billion pipeline joint venture linking Australia to Papua New Guinea. The deal for more than 20 petajoules (19 billion cubic feet) of gas a year over more than 10 years would bring potential sales signed up for the project within the range ExxonMobil has said is needed to start the development and design phase of the 3,200-km (2,000-mile) -long pipeline. "All I can say is that we are in negotiations with PNG and we are to get to some sort of agreement fairly soon," Queensland Alumina Ltd Managing Director Johann van Zyl told Reuters. "We are talking in excess of 20 petajoules a year. It'll be a long-term arrangement -- in excess of 10 years," he added. The project has so far signed up potential sales of 84 to 135 petajoules (79 to 127 billion cubic feet) a year. Exxon Mobil has said 100-150 petajoules is needed to begin the engineering and design phase. Australian-listed PNG oil and gas producer Oil Search has a 51.36 percent stake in the project for which construction needs to begin next year if the first gas deliveries earmarked for 2007 are to be met. Queensland Alumina (QAL), which operates the 3.8 million tonnes-a-year Gladstone refinery, is planning to convert its coal-fired boilers to gas which van Zyl said was the reason for the PNG deal. "If we change our present energy sources then we need more gas," van Zyl said. QAL, which on Monday signed a 15-year contract with power and gas retailer Origin Energy for 180 petajoules of coal seam gas from late 2006, currently consumes 16 petajoules of gas a year. Queensland Alumina Ltd Gladstone refinery is 20-percent-owned by French aluminium group Pechiney SA . Rival Rio Tinto Ltd/plc has 39 percent, Alcan 21 percent and U.S.-based Kaiser Aluminium Corp 20 percent. Any QAL contract would follow a major setback for the PNG project last December when its cornerstone customer, the Australian Gas Light Co , bailed out in favour of gas from local fields saying they met an aim to secure supplies at a competitive price. The six trillion cubic feet of gas reserves in the PNG fields face tough competition from local supplies such as those in the Gippsland and Cooper basins as well as those in the Timor Sea. Other stakeholders in the PNG project are Nippon Oil Corp <5001.T> unit Nippon Oil Exploration Ltd and the Mineral Resources Development Co, which represents landowners. Oilsearch shares recovered from an intraday low of A$1 on Tuesday to trade up 1.92 percent at A$1.06 by early afternoon. The broader market was up 0.86 percent. ($1=A$1.39) ((Reporting by Joanne Collins, editing by William Willitts; [email protected]; Reuters Messaging: [email protected]; +613 9286 1435))
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