May 13, 2009 / 2:35 AM / 9 years ago

UPDATE 1-BG agrees deal with China's CNOOC on Australia LNG

* CNOOC to buy 3.6 mtpa of LNG from BG Australia plant

* CNOOC to become equity investor in 1 of the 2 LNG trains (Adds details, background)

PERTH, May 13 (Reuters) - China National Offshore Oil Corp (CNOOC) will buy liquefied natural gas from a proposed BG Group Ltd BG.L Australian plant, making the UK firm the first building a coal seam gas-fed LNG plant in Australia to sign a customer.

CNOOC will buy 3.6 million tonnes per annum (mtpa) of LNG for a period of 20 years from the start-up of BG’s Queensland Curtis Island LNG (QCLNG) project, to be built in the northeastern of Australia, BG said in a statement.

The Chinese firm will also become a 10 percent equity investor in one of the two LNG production trains at the planned development and will buy 5 percent of BG’s interests in coal seam gas reserves and resources of certain tenements in the Walloons Fairway in Queensland’s Surat Basin.

The two companies will participate in a consortium that will build two LNG ships.

“This agreement is another important milestone in the development of the Queensland Curtis LNG project,” BG Chief Executive Frank Chapman said in a statement.

The sale is the first out of three proposed coal seam gas-to-LNG projects on Australia’s east coast and signals that demand for long-term gas supplies is still buoyant despite the financial crisis.

    It also shows that lining up overseas customers may not be as challenging as some analysts have thought.

    As well as BG, a joint venture between ConocoPhillips (ORG.AX) and Origin Energy Ltd (ORG.AX) and another between Malaysia’s Petronas [PETR.UL] and Santos Ltd (STO.AX) are building similar projects in Queensland.

    The deal also marks CNOOC’s second LNG investment in Asia. Last month it signed an commercial agreement with Papua New Guinea’s state-owned Petromin to develop a proposed LNG project in the Pacific nation.

    BG said it was making good progress on the project and the first phase of development will have a capacity of around 7.4 mtpa of LNG from two production trains. It expects to make a final investment decision in 2010 and first gas production in 2014. (Reporting by Fayen Wong)

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