THE WALL STREET JOURNAL: Osaka Gas Nears Deal to Buy Chevron Venture's Natural Gas: MONDAY 5 DECEMBER 2005

TOKYO -- Japan's Osaka Gas Co. is close to an initial agreement with Chevron Corp. for the long-term purchase of liquefied natural gas from Australia's Greater Gorgon venture, which is half-owned by Chevron, according to officials familiar with the talks.

A draft agreement likely will be reached in the next few weeks, the officials said.

If completed, the deal would help Osaka Gas reduce its heavy reliance on Indonesia as its main source of LNG imports. The gas utility also has been seeking to purchase overseas oil and gas assets as part of its efforts to diversify its business portfolio.

If the deal is completed, Osaka Gas, Japan's second-largest gas utility, will buy one million to 1.5 million metric tons a year of LNG from the Gorgon venture for 20 to 25 years starting in 2010, an official said.

A spokesman for Osaka Gas declined to comment on negotiations between his company and Chevron Australia Pty Ltd. Chevron also declined to comment.

The contract with Gorgon LNG would mark the third deal by a Japanese power and gas utility to import LNG from the Chevron-led project.

Osaka Gas annually imports about 6.1 million tons of LNG, with half of this coming from Indonesia through long-term supply contracts. In 2011, some of its contracts with Indonesia are set to expire.

Over the past two months, Tokyo Gas Co. and Chubu Electric Power Co. have reached initial agreements with Chevron Australia to purchase LNG from the Greater Gorgon project. Tokyo Gas will start buying 1.2 million tons a year of LNG over 25 years, while Chubu Electric plans to purchase 1.5 million tons a year over 25 years.

Tokyo Gas and Chubu Electric also are each in talks with Chevron Australia to acquire stakes in the Gorgon LNG project. In addition, Osaka Gas is in talks with Chevron Australia to acquire a stake in the project, the officials familiar with the matter said.

The Greater Gorgon area, off Australia's northwest coast, contains an estimated gas resource in excess of 40 trillion cubic feet.

Project operator Chevron, of San Ramon, California, holds a 50% stake in the Gorgon LNG venture, while Royal Dutch Shell PLC and Exxon Mobil Corp. own 25% each. Australia said Thursday that it had reached a revenue-sharing agreement with East Timor on the project, saying this would provide legal certainties that should permit the stalled exploitation of the gas reserves there to go ahead.

Write to Shigeru Sato at shigeru.sato@dowjones.com