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SMH article
Gas: Australia's biggest-ever deal looms March 24, 2010 - 12:43PM

Australia's single biggest trade deal is about to be signed-off, with a state-owned Chinese group expected to agree to buy $80 billion in natural gas from a Queensland project.

Resources Minister Martin Ferguson is in Beijing for the signing of the deal between Britain's BG Group and the China National Offshore Oil Corp (CNOOC), according to a report.

The deal by which CNOOC would buy 3.6 million tonnes of liquefied natural gas (LNG) from BG Group's Queensland Curtis LNG project each year for 20 years was proposed in May 2009.

The deal is expected to be worth about $80 billion and would be Australia's biggest ever trade, eclipsing a $50 billion deal from the massive Gorgon LNG project offshore from Western Australia.

The transaction is expected to include CNOOC buying a five per cent stake of BG Group's upstream interests in some Queensland coal seam gas tenements, and the Chinese company becoming a 10 per cent equity investor in a proposed gas train at Gladstone, on Queensland's central coast.

BG and CNOOC would participate in a consortium formed to build two LNG ships in China, according to the announcement made last year.

"It will be the biggest single LNG contract signed in Australia to date," RBS Morgans senior analyst, oil, gas and energy, Nik Burns, told AAP.

"The Gorgon contracts in aggregate were of higher value, but this is the largest single purchase that will be formally executed," Mr Burns said.

Mr Burns said the deal would assist the BG Group to make a final investment decision to proceed with the project, which still awaits environmental approval.

I think that this deal, combined with the Shell-PetroChina offer to acquire Arrow Energy, has really breathed life back into the coal seam gas sector, Mr Burns said.

Royal Dutch Shell and PetroChina last week made a joint multi-billion dollar bid for Arrow Energy, which controls huge coal seam gas reserves in Queensland.

As well as BG Groups proposed LNG development, several other projects are planned in the state.

Shell is planning a four-train LNG plant, while Santos Ltd have another project with Malaysian giant Petronas, and Origin Energy has the Australia Pacific LNG project with ConocoPhillips.

We dont believe there will be four separate coal seam gas projects, Mr Burns said.We believe there will be more consolidation there.


AAP

Jeff