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Queensland Gas Company (QGC) acquired Pure Energy acquired Project Development Agreement with CNOOC Environmental Impact Statement (EIS) submitted

Key dates

2008
Alliance with QGC established

Queensland Curtis LNG Project awarded ‘Significant Project Status’

Bechtel appointed for FEED study

Agreed takeover of QGC

BG Group entered Australia in early 2008 via an alliance with Queensland Gas Company to develop coal seam gas acreage and construct and own a LNG liquefaction plant. BG Group’s plans are for an initial two-train 7.4mtpa plant, with potential for expansion. Australia is a key growth asset and central to BG Group’s Asia Pacific LNG strategy.

In 2008, QGC produced 3.8 mmboe and supplied around 20% of Queensland’s gas market. The development of the Queensland Curtis LNG (QCLNG) Project will expand production significantly, and in 2015 the Group’s Australian production is expected to be over 80 mmboe. LNG production will enable BG Group to supply its Asia Pacific customer base with locally-produced supply, accessing high-value markets. Australia is intended to be a material, long-term base for BG Group and a key driver for the Group’s production growth.

In February 2008, BG Group announced an alliance with QGC, a leading coal seam gas (CSG) company supplying the Queensland market. BG Group acquired a 20% interest in QGC’s CSG assets in the Surat Basin, southern Queensland, and a 9.9% stake in QGC for a total consideration of £316 million. Under the agreement, the companies’ plans were to develop the CSG acreage to deliver to the domestic market and to a new LNG production and export facility on the Queensland coast, jointly-owned by BG Group and QGC.

Following a successful drilling campaign and the decision to develop a multi-train LNG project, the Boards of BG Group and QGC announced in October 2008 that they had agreed the terms of a recommended take-over. BG Group acquired all the issued shares in QGC at A$5.75 per share by means of an unconditional on-market takeover bid on the Australian Securities Exchange. The offer valued QGC at approximately A$5.6 billion (£2.2 billion). In March 2009, BG Group completed the acquisition of QGC.

The acquisition of QGC brought 11 tcf of resource to the Group. Production is currently supplying the domestic market. Future production will also supply a LNG liquefaction plant so that in 2015, production is expected to total 80 mmboe. The QCLNG Project includes an initial two-train 7.4mtpa liquefaction plant with potential expansion up to 12mtpa. The plant is to be built on a 270 hectare site at North China Bay on Curtis Island, Gladstone, on the Queensland coast, and first LNG for delivery is expected in 2014. The project also involves the construction of a 380 kilometre underground pipeline to Gladstone, additional pipeline capacity to link nearby CSG resources, as well as the development of the LNG terminal. Bechtel has been appointed to work on the FEED study and BG Group expects to sanction the project in 2010.

In July 2008, the QCLNG Project was awarded ‘Significant Project Status’ by the Queensland government, which triggers environmental impact assessment under Queensland and Australian government legislation. In August 2009, BG Group submitted its Environmental Impact Statement for public consultation and a decision from the Queensland and Australian authorities is expected in early 2010.

In February 2009, to secure additional CSG resource, BG Group made an all-cash takeover offer to acquire all of the issued shares in Pure Energy Resources Limited (Pure Energy) for A$6.40 per share. BG Group increased its offer to A$8.25 per share and subsequently completed the acquisition in May for a total consideration of A$1 014million (£464million). The acquisition adds 2 tcf of CSG resource, making a total of more than 13 tcf of reserves and resources in Queensland.

The acquisition of Pure Energy has brought additional CSG reserves and resources located adjacent to key QGC licences in the Surat Basin. In addition, the acquisition brings large tracts of prospective coal seam gas acreage in Queensland’s Bowen Basin. In total, BG Group now owns interests in onshore concessions in Australia covering more than 130 000 square kilometres. In Queensland, the business holds interests in more than 40 000 square kilometres of acreage. To date, only a fraction of the total ground under lease has been explored or developed.

In May 2009, BG Group signed a LNG Project Development Agreement with China National Offshore Oil Corporation and its affiliates (CNOOC), focused on the QCLNG Project. The agreement sets out the basis on which:

• CNOOC will purchase 3.6mtpa of LNG for a period of 20 years from the start-up of QCLNG;
  
  
• CNOOC will purchase 5% of BG Group’s interest in the reserves and resources of certain tenements in the Walloons Fairway of the Surat Basin in Queensland;
  
  
• CNOOC will become a 10% equity investor in one of the two liquefaction trains that will form the first phase of QCLNG; and
  
  
• BG Group and CNOOC will jointly participate in a consortium formed to construct two LNG ships in China that would be owned by the consortium.

BG Group and CNOOC intend to complete negotiations and execute fully-termed transaction documents prior to the final investment decision in 2010 to sanction the project.

QCLNG is firmly underpinned by BG Group’s global LNG supply agreements. Upon execution of the fully-termed transaction documents with CNOOC,
BG Group's LNG supply commitments with partners and customers in Chile, Singapore and China will account for up to 8.3mtpa, firmly underpinning development of the two-train first phase of the QCLNG Project.

Condamine Power Station

Acquired through the take-over of QGC, BG Group also operates Condamine Power Station, which is fuelled by CSG produced at QGC’s gas fields in the Surat Basin.With a potential generating capacity of 140MW, the station provides power for the National Electricity Market and is expected to be at full capacity (combined cycle) operation in late 2009.

Further information: 

Queensland Curtis LNG website - www.qclng.com.au

Queensland Gas Company website – www.qgc.com.au