UPDATE 1-Exxon says Sinopec to buy Papua New Guinea LNG

* Sinopec in talks to buy gas from Exxon's PNG project

* Preliminary offtake agreement is for 2 mtpy (Adds details, background)

PERTH, Nov 4 (Reuters) - U.S. major ExxonMobil Corp (XOM.N) has reached a preliminary deal to sell 2 million tonnes a year of liquefied natural gas (LNG) from its Papua New Guinea project to China's Sinopec (0386.HK), a key step in moving the project towards final approval.

The agreement with Sinopec means the Exxon-led Papua New Guinea LNG project is now in exclusive talks with four major Asian LNG buyers for binding sales contracts which will underpin almost all of the project's full 6.6 million tonnes per year (mtpy) capacity, Exxon said on Wednesday.

The venture, which includes Australia's Oil Search Ltd (OSH.AX), Santos Ltd (STO.AX), Japan's Nippon Oil Corp (5001.T) and PNG land owners, is rushing to finalise sales agreements for the project ahead of a final investment decision targetted for Dec. 8.

Sinopec is the unnamed Asian buyer which the venture said in April was seeking government approval on the terms of the supply talks, said an Oil Search spokesman.

Other potential gas buyers for the project are Japan's Tokyo Electric (9501.T), Osaka Gas Ltd (9532.T) and Taiwan's CPC Corp.

Sinopec said in a separate statement that the LNG from the Exxon project will be supplied to its Qingdao receiving terminal which will be built in the Shandong province.

The deal, if finalised, will also be Sinopec's first LNG purchase agreement which will support its ambitions to expand its share of the domestic gas market that is being dominated by PetroChina (0857.HK).

Sinopec has planned the Qingdao terminal for several years but it has made little progress as it has not been able to secure LNG supplies, lagging behind rivals CNOOC and PetroChina which already have three and two terminals respectively that are various stages of development.

The PNG LNG development is one of the handful of projects among the dozens planned in the Asia-Pacific region that have manage to secure customers to underpin all of its production capacity -- giving it the front-runner status.

China's gas consumption is set to nearly triple over the next 10 years, potentially rising to around 18 billion cubic feet per day by 2020 and making the country the world's No. 3 gas market after Russia and the United States. (Additional reporting by Jim Bai in BEIJING) (Reporting by Fayen Wong; Editing by Sanjeev Miglani)