BG to become first supplier of LNG in China
Theses Heads of Agreement cover two aspects:
– Transfer of working interests from BG Group to CNOOC
This transaction is strategic for both companies as QCLNG is the world first project to produce liquefied natural gas (LNG) from coal seam gas (CSG).
In following, BG Group made the final investment decision (FID) to invest more than $20 billion capital expenditure in targeting the completion of the QCLNG project in 2014.
Since then BG Group signed other long term contracts for LNG deliveries with Tokyo Gas and Chubu Electric from Japan.
Compared with other LNG projects in Australia, mostly offshore, QCLNG finds its feedstock from onshore coal seam gas in the Surat Basin and the Bowen Basin in the Queensland.
This coal seam gas was developed by QGC since 1999 to supply Queensland with natural gas.
With BG Group‘s friendly take over QGC in 2008, the coal seam gas turned to be developed in addition for export LNG to Asia.
CNOOC to take 50% interest in QCLNG project
According to the terms of the contract:
– CNOOC will increase its working interests in QCLNG Train 1 from the actual 10% to 50%
– CNOOC will pay $1.93 billion compensation to BG Group
– BG Group will supply 5 million t/y of LNG to CNOOC from QCLNG in addition to the previous 3.6 million t/y signed in 2010. With 8.6 million t/y in total, BG Group becomes the largest supplier of LNG to China.
When the contract will be finalized, BG Group will still remain as operator of the QCLNG project and keep 74% of the proven reserves.
BG Group will also retain 100% interest and operatorship role of the:
– 450 kilometers export pipeline
– LNG storage facilities on the Curtis Island
– Export jetty
Through this agreement, CNOOC takes a strategic position in a complex coal seam gas project that could be used as a full scale learning case for further similar project in China, while BG Group restores its cash position, takes Chinese LNG market leadership and maintains its leading position in the giant QCLNG project to come on stream in 2014.