PERTH (miningweekly.com) – Liquefied natural gas (LNG) major BG Group this week signed a binding agreement with China National Offshore Oil Corporation (CNOOC) for the sale of a A$2-billion stake in the Queensland Curtis LNG (QCLNG) project, as well as the supply of an additional five-million tons a year of LNG.

“Combined with the 3.6-million-ton-a-year LNG sale agreement signed with CNOOC in 2010, BG Group now has total committed volumes to China of 8.6-million tons a year, which will make the group the largest supplier of LNG to the world’s fastest-growing energy market,” said CEO Chris Finlayson.

“More broadly, the agreements expand our strong LNG position in the Asia-Pacific region, where we are on schedule with our LNG export project on Curtis Island in Queensland; where we have signed long-term LNG sales contracts with customers in China, Japan and India; and where we will soon begin importing LNG into Singapore through our position as sole gas market aggregator,” he added.

Under the terms of the transaction, CNOOC would acquire a 40% equity interest in QCLNG train 1, increasing its equity ownership from 10% to 50%. The Chinese firm would also acquire a 20% interest in the reserves and resources of certain BG Group tenements in the Walloons Fairway region of the Surat basin, increasing its ownership from 5% to 25%.

Furthermore, CNOOC would acquire a 25% equity interest in certain other upstream tenements held by BG Group in the Surat and Bowen basins.

The two firms would jointly invest in the construction of two LNG ships in China, adding to the two ships already committed under the LNG agreements signed in 2010.

Australian Resources and Energy Minister Gary Gray welcomed the agreement, saying it reaffirmed Australia as a leader in supplying cleaner hydrocarbon energy to global markets.

“The future of LNG production is in Australia and this agreement demonstrates we are increasing our capabilities in LNG construction and operation through a focus on innovation and the right approach from government and industry,” the Minister said.

QCLNG is on schedule to be the world's first project to produce LNG from natural gas out of coal seams, with first exports due next year. The A$20-billion project is more than half complete, with the roof having already been raised on one of the two LNG tanks on Curtis Island, off Gladstone, on Queensland's central coast.

The QCLNG project involves the expansion of natural gas production in the Surat basin and construction of a 540 km pipeline network, to Gladstone, and an LNG plant.

More than A$8.7-billion – or 76% of the A$11.4-billion spent, to date, on the project – has been invested with Australian firms since January 2010.