Cnooc To Buy Australian Gas From BG

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SYDNEY -- China National Offshore Oil Corp. said it will buy liquefied natural gas from BG Group Ltd., making the U.K. firm the first to sign a customer for a large-scale LNG project that is fed by coal-seam gas.

Coal-seam gas has never been turned into LNG for export before, and three separate groups are working to be the first to do so, all based at the Australian port town of Gladstone in Queensland state.

BG said Cnooc, China's biggest offshore oil and gas producer by output, will purchase 3.6 million metric tons a year of Gladstone LNG for 20 years.

Cnooc has also agreed to buy 5% of BG's interests in certain coal-seam gas tenements in Queensland's Surat Basin. It will also become a 10% shareholder in one of the plant's first two LNG processing trains, and the two companies will participate in a consortium to build two LNG ships.

A BG spokesman said a price on the deal won't be disclosed until the agreement is completed. He said BG is on track to make a final investment decision for the LNG plant in the first half of 2010.

Cnooc President Fu Chengyu said the agreement will help the company secure cleaner energy to support China's economic development. Cnooc said it has already built four LNG receiving terminals.

BG has LNG supply agreements with Chile and Singapore and has indicated previously it could add Gladstone LNG to the supply mix.

BG said demand from Chile and Singapore would account for 8.3 million metric tons a year of LNG.

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