Australia has another huge LNG contract, in fact the biggest yet.
The BG Group of the UK (which last year snapped up Queensland Gas Co and China’s Cnooc Group signed an $US60 billion deal in Beijing late yesterday.
CNOOC will 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 nearly 12 months ago.
The contract came a year after the two companies agreed to the outline of a 20-year supply agreement from BG’s proposed LNG export terminal in Gladstone, in central Queensland.
The deal will see the LNG boom spread to Queensland from Western Australia. Billions of dollars will now be generated in the state.
This morning there’s also news that Woodside, which has long spurned LNG from coal seam gas, could be eyeing Santos and may mount a $15 billion bid.
There would be considerable competition and national interest arguments as Shell controls Woodside with a 34% stake and also wants to takeover Arrow in Queensland as well.
The story in the Fairfax media is very bullish, but investors should keep a close on global financial markets which last night shook as Portugal had its credit rating cut and the Europeans continuing brawling over helping Greece.
The euro fell to new lows against the Aussie dollar, which was rock solid as the US dollar jumped. Failure to sort out greece could damage the recovery sentiment taking hold everywhere, including Australia.
The BG deal also came days after Arrow Energy agreed to a hither $3.5 billion takeover offer from Shell and PetroChina.
The two deals again confirm the huge potential this form of "unconventional gas" has in Australia.
Coal seam methane is transforming the Australian energy picture in a way no one envisaged even three years ago.
Then our gas reserves and potential were based on conventional gas from the North West Shelf and other areas off the WA coast.
Now the coal seam gas is providing an alternative on the east coast and we will see more changes in the line-up of the Queensland industry in the coming year as the market sorts out the likelihood of the four mooted projects going ahead.
The project will use LNG made from coal seam gas (methane) extracted from holdings BG has in central Queensland, much of which came with the Queensland Gas takeover.
Last year’s agreement stated Cnooc would buy 5% of BG’s interests in certain coal-seam gas wells in the Surat Basin in Queensland.
It also spelled out that Cnooc would take a 10% shareholding in the two LNG processing trains, as well as participate as an investor in a unit that would build two LNG transport ships.
Resources Minister Martin Ferguson was in Beijing for the signing of the deal.
The deal is expected to be worth about $60 billion, according to Mr Ferguson’s office, 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.
As well as BG Group’s proposed LNG development, several other projects are planned in the state.
Shell is planning a four-train LNG plant, while Santos Ltd has another project with Malaysian giant Petronas, and Origin Energy has the Australia Pacific LNG project with ConocoPhillips.
The Chevron Gorgon project off the WA coast will be bigger collectively, but at the moment the BG Group deal is the largest single sale.
