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China, BG said to complete record Australian LNG deal

(Agencies)
Updated: 2010-03-24 13:51

China National Offshore Oil Corp will commit to buy liquefied national gas from BG Group Plc in Australia's largest LNG accord today, the Australian Financial Review reported, citing unidentified people close to the deal.

The agreement will be signed at 4 pm local time in Beijing, said one company official who asked not to be named because the contract hasn't been made public. Australian Resources Minister Martin Ferguson will attend the ceremony. The companies in May announced an initial accord for the supply of 3.6 million metric tons annually of LNG from BG's Curtis project over 20 years.

"The gross value of the contract is estimated to be as high as $70 billion, making it the largest LNG deal in Australia," Nik Burns, an analyst at RBS Morgans in Melbourne, said in an interview on Bloomberg TV today.

The transaction will eclipse the A$50 billion ($46 billion) Gorgon contract Exxon Mobil Corp signed last year with PetroChina Co China, the world's second-biggest energy user, wants to treble the use of cleaner-burning gas to about 10 percent of energy consumption by 2020 to reduce reliance on more polluting coal.

Jiang Yongzhi, a spokesman for Cnooc Ltd, China National Offshore's Hong Kong-listed unit, referred a request for comment to the parent, which operates the group's LNG business. Calls to the media office at China National Offshore in Beijing weren't immediately answered.

China National Offshore is set to sign "about three" term contracts to purchase LNG this year, President Fu Chengyu said on March 14. The Beijing-based company operates three LNG terminals in Guangzhou, Fujian and Shanghai and is building a fourth in Zhejiang, according to the company's website.

Australian Ventures

Queensland Curtis is among more than 12 LNG ventures proposed for Australia and Papua New Guinea, targeting Asian demand for cleaner-burning fuels than coal and oil.

Reading, England-based BG is planning one of five coal-seam gas-to-LNG projects at Gladstone in Queensland. UK's third largest oil and gas producer plans to build an LNG plant with first-phase capacity of 7.4 million tons a year from two processing units near Gladstone on the central Queensland coast, according to its website.

Chinese companies have spent at least $13 billion on energy acquisitions in the last two years. Royal Dutch Shell Plc and PetroChina agreed this week to buy Arrow Energy Ltd after raising their offer to A$3.5 billion, marking China's entry to Australia's coal-seam gas industry.

PetroChina's August agreement with Exxon to buy 2.25 million tons a year of LNG from the Chevron Corp-led Gorgon project in Western Australia over 20 years was estimated by the Australian government to be worth about A$50 billion.

Coal-seam gas is mostly methane found on the surface of coal. The gas can be extracted when pressure on the seams is reduced, usually by removing water. LNG is natural gas chilled to liquid form for transport by ship to destinations not connected by pipeline.