The strategy that sealed the NWS $25 billion supply contract meant that the China National Offshore Oil Corporation (CNOOC) took a 5.3% share in the gas reserves, equal to 1.1tcf, as long as the partners agreed to a long term LNG purchase contract.

CNOOC announced today that it has signed a letter agreement with the Gorgon partners to start discussions about an upstream investment in the Gorgon project. In addition, CNOOC agreed to explore marketing opportunities for natural gas from Gorgon into China.

"LNG will play an increasingly important role in meeting China's growing energy demand. CNOOC has already developed a competitive advantage in China's LNG and natural gas markets,” said Wei Liucheng, chairman and CEO of CNOOC.

“A potential partnership with Gorgon will further enhance our substantial position in this market and it will create a win-win outcome for China and Australia."

Currently the partners have only agreed to talks with the Chinese, yet securing sufficient foundation supply contracts could be the last major hurdle before final development approval for the Gorgon project.

On Monday the Western Australian Cabinet gave in-principal approval to the development of the A-1 environmental reserve on Barrow Island for the projects LNG plant.

The partners now need to secure enough sales to support a single train producing five million tones of LNG per year for the $11 billion project to get started.

Prior to the Cabinet’s approval tentative deals for supply to the west coast of the US were struck with both Chevron Texaco and Shell for two million tonnes of LNG per year each for 20 years from 2008.

However, the deals are only letters of intent and MoUs, which some sceptics have branded as a ploy to pressure the Cabinet’s decision.