Woodside Petroleum Ltd. appears to have negotiated more favorable pricing terms for sales from its planned A$12 billion ($10.2 billion) Pluto liquefied natural gas project than other ventures in the region, analysts said.

Australia's second-biggest oil and gas producer may have agreed with its two Japanese customers on a minimum price that is ``significantly higher'' than typical in Asia at low crude-oil prices, Wood Mackenzie Consultants Ltd. said yesterday in a report. The project may not have gone ahead otherwise, it said.

Woodside on July 27 approved the Pluto project, at a budget as much as double a November estimate due to rising construction costs. The LNG sales contract is ``one of a kind'' that protects Woodside's revenue even if oil prices fall as low as $20 a barrel, Chief Executive Officer Don Voelte said. Pluto is the first formal approval of an LNG project since December 2005 even amid rising demand for the fuel for power generation.

``The significance of this announcement spans across the LNG business which in recent times has, in terms of new project development, been stymied by continued cost, environmental and geopolitical challenges,'' Wood Mackenzie said. It may signal Asian LNG buyers are accepting the need to pay suppliers prices ``that give them the security to deliver green-field projects in the event of low oil prices in return for securing supply and some protection from high oil prices.''

Shares in Woodside today rose as much as 81 cents, or 1.9 percent, to A$43.15 on the Australian Stock Exchange, beating a gain of as much as 1.4 percent on the exchange's benchmark energy index. They were at A$42.33 at 1:37 p.m. in Sydney.

`Vigorous' Talks

The negotiation on prices, which were modified from initial accords with Kansai Electric Power Co. and Tokyo Gas Co. because of an increase in construction costs, were ``vigorous,'' Voelte said July 27. ``They wanted the volumes, we wanted to sell 'em.''

Pluto is set to be Australia's third producing LNG venture after the North West Shelf and ConocoPhillips's Darwin LNG plant. Chevron Corp., Inpex Holdings Inc., BHP Billiton Ltd. and Santos Ltd. are among companies seeking to develop rival LNG projects in the country. Chevron, the second-biggest U.S. oil company, last year dropped a timetable for developing the delayed Gorgon LNG project in Western Australia, which Wall Street Access in June said may cost about $20 billion.

Edinburgh-based Wood Mackenzie estimates the floor price in the contract is about $7.40 per million British thermal units, at $20-a-barrel oil. Woodside may have given up the chance of higher prices in the early production years in return, it said. Prices for LNG in long-term contracts are typically tied to oil prices.

North West Shelf

The LNG prices appear to be better than those negotiated mid-2006 for extensions to sales contracts from the Woodside- operated North West Shelf venture at lower oil prices, said Mark Greenwood, an oil and gas analyst at JPMorgan Chase & Co. in Sydney.

``The project wouldn't have gone ahead if it was based on lower prices,'' Greenwood said.

The terms of the proposed sale of 5 percent stakes to Tokyo Gas and Kansai Electric appear to be part of an integrated agreement that includes the inclusion of a minimum gas price and possibly shipping arrangements for the fuel, Greenwood said.

The pricing terms guarantee the Pluto venture annual revenue of at least A$2 billion and an internal rate of return of at least 10 percent, even at oil prices as low as $20 a barrel and the increased construction cost, Voelte said. He declined to comment specifically on the LNG prices.

``Working with Tokyo Gas and Kansai Electric in this highly escalating cost world we developed a relationship and a gas sales contract in a way that provided them protection and provided us protection,'' Voelte said. ``I suspect every other competitor is going to try and want to figure out what we did to make it work.''

`Convoluted Formula'

The Pluto LNG sales contract appears to use a ``convoluted'' formula using a minimum price of about $40 a barrel for crude oil, which equates to an assumed gas price of at least $7.75 per million Btu, Merrill Lynch & Co. said in a July 30 report.

Goldman Sachs JBWere Pty assumes a long-term LNG price from Pluto of $8 per million Btu at $40-a-barrel oil in 2011 dollars, or $7.25 in today's dollars, the firm said in a July 27 report.

``It appears pricing arrangements are significantly better than we expected and more than overcomes the higher capex associated with the development,'' Goldman said. Prices are ``reasonable'' given existing U.S. gas prices, it said.

Natural gas for September delivery closed yesterday at $6.106 per million Btu on the New York Mercantile Exchange.

LNG is gas chilled to liquid form, reducing it to one-six- hundredth of its original volume, for transportation by tanker to destinations not connected by pipeline.