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BG Group finalises LNG supply and equity agreement with CNOOC

Oilfield Technology,

BG Group has signed binding agreements with China National Offshore Oil Corporation (CNOOC) for the sale of additional interests in the Queensland Curtis LNG (QCLNG) project in Australia for US$ 1.93 billion and for the supply of an additional 5 million tpy of LNG.

BG Group Chief Executive Chris Finlayson said, “These agreements extend our strong relationship with CNOOC, which spans not only LNG but also exploration offshore China and production in the UK Continental Shelf through participation in the large Buzzard oil field.

“Combined with the 3.6 million tonnes per annum (mtpa) LNG sale agreement signed with CNOOC in 2010, BG Group now has total committed volumes to China of 8.6 mtpa which will make the Group the largest supplier of LNG to the world’s fastest growing energy market.

“More broadly, the agreements expand our strong LNG position in the Asia-Pacific region, where we are on schedule with our LNG export project on Curtis Island in Queensland; where we have signed long-term LNG sales contracts with customers in China, Japan and India; and, where we will soon begin importing LNG into Singapore through our position as sole gas market aggregator,” Mr Finlayson said.

Under the terms of the agreements:

  • BG Group will sell interests in upstream coal seam gas tenements in Australia and a further equity stake in the QCLNG project Train 1 liquefaction facility for US$ 1.93 billion. CNOOC will acquire a 40% equity interest in QCLNG Train 1, increasing its equity ownership from 10% to 50%. 
  • BG Group will supply CNOOC with a further 5 million tpy of LNG for 20 years beginning in 2015.
  • CNOOC will acquire a 20% interest in the reserves and resources of certain BG Group tenements in the Walloons Fairway region of the Surat Basin, Queensland, increasing its ownership from 5% to 25%.
  • CNOOC will acquire a 25% equity interest in certain other upstream tenements held by BG Group in the Surat and Bowen Basins, Queensland.
  • BG Group and CNOOC will jointly invest in the construction of two LNG ships in China, adding to the two ships already committed under the LNG agreements signed in March 2010.
  • CNOOC will have the option to participate up to 25% in one of the potential expansion trains at QCLNG.

The agreements exclude any interest in the Train 2 liquefaction facility, transmission pipeline and QCLNG project common facilities.

Completion of the transaction is expected by the end of the year, subject to government, regulatory and other relevant approvals and to the finalising and execution of certain other related documentation.

BG Group’s Australian business QGC Pty Limited remains operator and retains majority ownership of the QCLNG project. In particular, BG Group will have:

  • Around 74% of its original interest in the upstream resource and related infrastructure; and
  • 100% of the project’s common facilities on Curtis Island (including LNG storage tanks and jetty) and the 540 kilometre natural gas pipeline network linking the gas fields to Curtis Island. Together, these items represent approximately 30% of the estimated 2011-2014 project spend.

Adapted from press release by Peter Farrell.

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