UPDATE 2-KOGAS to buy Gladstone LNG stake, sign supply deal
* KOGAS says also made 20-year LNG supply deal with Santos
* Santos says cannot confirm deal, says in "advanced talks" (Adds background)
SEOUL/PERTH, Dec 16 (Reuters) - State-run Korea Gas Corp (KOGAS) will buy a 15 percent stake in Australia's Gladstone LNG project on Friday and agree on a long-term supply deal, the South Korean government said, paving the way for a final investment decision on the $15 billion project.
In a complex transaction, KOGAS will buy 7.5 percent each from Australia Santos , the project's operator, and Malaysia's Petronas, the government said in a statement on Thursday.
In addition, Santos will also sell an additional 7.5 percent stake in the 7.2 million tonne-per-year Gladstone to France's Total to cut its stake to 30 percent, just ahead of the 27.5 percent to be held by both Petronas and Total.
"This deal is the first long-term import contract with Australia. We expect this to help diversifying supplying lines from Middle East and southeast Asian countries, and secure stable supplies," the Korean government said in a statement.
KOGAS will also import 3.5 million tonnes of liquefied natural gas (LNG) per year from Gladstone for 20 years starting in 2015.
South Korea, the world's second biggest LNG buyer after Japan, could initially cover about 11 percent of its annual LNG consumption from the deal.
Santos would not confirm the deal and said while it was in advanced talks with KOGAS, it had not reached a definitive agreement. [ID:nSDYFKE6FE]
Its shares closed up 2.9 percent at A$12.97.
The company has been widely expected to give a final approval to the project this week ahead of the Christmas holidays, but needed the KOGAS deal before a final go ahead. [ID:nL3E6NF0E3]
FIRING UP AUSTRALIA LNG
The finalization of the Gladstone project would be a major step in kick-starting the coal seam gas industry in Australia's eastern Queensland state.
Santos' decision to move ahead with GLNG would follow BG Group's decision in November to approve another coal seam gas-fed LNG export project in the same region.
GLNG and BG's Queensland Curtis LNG are expected to produce a combined 15.7 million tonnes per annum (mtpa) of liquefied natural gas, or equivalent to nearly 90 percent of current Australian LNG exports.
Two additional coal seam gas projects, an Origin Energy and ConocoPhillips joint-venture and a Shell (RDSa.L) project, are expected to come online in Queensland between 2014 and 2017.
Australia has about $200 billion worth of LNG projects on the drawing board, and the industry estimates Australia will become the second-largest LNG exporter by 2020.
LNG production is likely to touch at least 60 million mtpa by that year, as producers scramble to meet demand from growth in Asian economies like China and India.
South Korea currently has mid-term import contracts with Australia signed in 2003 and is currently importing 500,000 tonnes per year from the country. (Reporting by Cho Mee-young in Seoul and Rebekah Kebede in Perth; Editing by Manash Goswami)