SYDNEY (REUTERS) – Australia is to set up a US-funded military fuel reserve in the city of Darwin, authorities said on Thursday (July 30), a show of stronger co-operation between the allies who both face increasing tension with China.

The chief minister of Australia’s Northern Territory, of which Darwin is the capital, confirmed the plan was part of a wider agreement between the allies to boost defence ties following high-level talks in Washington.

“What I am allowed to say is it will be thumpingly large, but the US government will be spending the money to see it built,” said a spokeswoman for the chief minister, Michael Gunner.

The agreement “recognises the Territory as one of the nation’s most strategically important defence locations… and we stand ready to do more”, the spokesman said.

Darwin, an isolated city of 130,000 people, is closer to some Asian capitals than to the Australian capital of Canberra.

The city has hosted a contingent of 1,250 US Marines since 2011, under former President Barack Obama’s pivot to Asia following China’s increased assertiveness in the region.

A 2015 decision to grant a 99-year lease over the city’s port to China’s Landbridge Group, meanwhile, raised some eyebrows in the United States, which objects to China’s extensive claims in the South China Sea.

Jian Zhang, a Chinese foreign policy expert at University of New South Wales, said the fuel reserve facility in Australia would be useful for the United States in the event of any conflict with China.

“Australia, as an alternative place for stockpiles of equipment and fuel reserves, is quite logical because the US bases in southeast Asia and the US bases in northeast Asia are most likely to be affected,” Jian said.

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