BG Group and China's CNOOC sign massive 20-year LNG sales deal
BG Group (LSE: BG) has signed a Liquefied Natural Gas (LNG) sales
contract with state-owned China National Offshore Oil Corporation
(CNOOC)
, concluding negotiations announced in May 2009, for the supply
of 3.6 million tonnes of LNG per annum (mtpa) over a 20-year period. The
deal is reported to be worth between US$40-80bn depending on varying
oil price assumptions.
"These agreements are a landmark
development in the relationship between our two companies, building on
what is already a close and productive partnership in deep water
exploration, offshore China”, BG chief executive Frank Chapman
commented. “CNOOC is a highly accomplished company and we look forward
to working together as we bring this new ground-breaking LNG project to
fruition".
Under the terms of the contract, CNOOC will be
supplied with LNG manufactured at the Queensland Curtis LNG facility,
Australia. BG Group may also supply CNOOC from the group's global LNG
portfolio.
The agreement is one of the largest LNG contracts in
Australia. It is the world's first fully-termed sale and purchase
agreement for the supply of LNG from coal seam gas, and marks the first
sale of LNG from coal seam gas into China, BG said.
The
Queensland Curtis LNG development is supported by BG’s LNG supply
agreements for a total of 8.3mtpa, consisting of the 20-year CNOOC deal
for 3.6mtpa, a 21-year agreement to supply Chile with 1.7mtpa and a
20-year agreement to supply up to 3mtpa to Singapore.
The
facility is being developed by BG's wholly owned Australian subsidiary
and subject to government approval, the FTSE100 constituent expects to
sanction the project this year. The plant is expected to come on-stream
by 2014. The plant will be supplied with coal seam gas from the
extensive acreage in the Surat Basin.
Under the terms of
parallel agreements between BG Group and CNOOC, the Chinese company is
also investing in the development of the facility. CNOOC will acquire a
5% equity interest in the reserves and resources of certain BG tenements
in the Walloons Fairway of the Surat Basin in Queensland. BG said the
total book value of sold assets is approximately US$270 million.
CNOOC
will also take a 10% equity investor in facility’s Train 1, which is
the first of two liquefaction trains to form the first phase of the
development. Additionally, the Chinese company will reimburse BG for 10%
of costs incurred in respect of Train 1, which is expected to be paid
in cash later this year. Furthermore, BG Group and CNOOC have agreed to
participate in a consortium to construct two LNG ships in China that
will be owned by the consortium.
BG Group and CNOOC have been in
partnership in offshore exploration in China since 2006, and in 2008,
the two companies agreed to explore further opportunities for strategic
cooperation.
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