A $15 billion deal for liquefied natural gas (LNG) involving
Australia, China and global-oil heavyweight Exxon-Mobil Corp. (NYSE: XOM)
has prompted many investors to worry that China may be using its
global-markets muscle to “paper over” cracks in the global economy.
In reality, however, this mega-deal is a harbinger of what’s to
come, and highlights the road that global investors must travel in
their journey to maximize their own investment returns.
If you feel like you need a guide on that journey, just look to
Australia. That country seems to be setting the pace when it comes to
obtaining both a way out of the global financial crisis and an
important new trading partner that could benefit their nation for years
to come. What’s happening there could be a model we’d best learn from.
As we have noted repeatedly here at Money Morning, when China buys, it buys big. Most recently, China’s global resource acquisition spree has centered on Australia (after tours through Canada, Africa, the Middle East and South America).
By some accounts, the timing couldn’t be better. Following the recent arrest of four Rio Tinto PLC (NYSE ADR: RTP) employees in China last month on corporate espionage charges,
the two countries needed to do something mutually beneficial to smooth
over relations. For China, the acquisition is viewed as a way to save
face and further its strategic interests. For Australia, this deal is a
source of cash that will flow right into the government coffers and
help the country rebound from the global financial crisis.
The transaction involved a place most people here have never heard of – Barrow Island.
Located about 30 miles off the northwest coast of Australia, and about
80 square miles in size, Barrow sits atop a supply of natural gas – a
portion of which that will now be liquefied and sent to China.
According to the terms of the deal made public recently, Australia
is going to process and ship some 15 million metric tons of the fuel
each year – enough for this deal to be worth roughly $15 billion over
the life of the contract.
Development of the project is expected to create 6,000 jobs
initially, with another 3,000 to follow.
