Largest Aussie binding trade deal done

Australia's largest binding trade deal, involving the Chinese purchase of about $60
billion worth of liquefied natural gas (LNG) from a Queensland project has been
signed.
The signing was also the world's first fully termed sales contract for LNG sourced
from coal seam gas (CSG), according to a statement from Resources Minister Martin
Ferguson, who witnessed the signing in Beijing.
The deal was between Britain's BG Group, which owns the CSG fields, and the
state-owned China National Offshore Oil Corp (CNOOC).
"This deal makes Australia the world leader in the coal seam gas-based LNG industry
and it brings us one important step closer to opening up a new LNG province on
Australia's east coast in Queensland," Mr Ferguson said in a statement on Wednesday.
"It also further demonstrates Australia's attractiveness as an internationally
competitive and safe destination for global capital."
CNOOC's 20-year deal with BG Group was proposed in May 2009 and will allow CNOOC to
buy 3.6 million tonnes per annum (Mtpa) of LNG from the British firm's Queensland
Curtis CSG-to-LNG project near Gladstone.
The amount is about half of the output expected during the first phase of the
project, which is slated to commence production in 2014 and will cost more than $10
billion to develop.
CNOOC was involved in China's first purchase of Australian LNG from the Woodside
Petroleum Ltd-operated North West Shelf in Western Australia in 2006.
Subject to foreign investment and other regulatory approvals, the Curtis deal
involves CNOOC buying an interest in BG Group's CSG resources in Queensland's Surat
Basin and becoming an equity partner in one of two proposed LNG processing `trains'
at Gladstone.
RBS Morgans senior analyst, oil, gas and energy, Nik Burns, said the deal would
assist BG Group to make a final investment decision to proceed with the project on
Curtis Island this year.
Queensland Premier Anna Bligh said federal and state environmental approval for the
project was expected by mid-2010.
Ms Bligh said the BG Group/CNOOC deal was Australia's largest LNG sales contract
between two entities and placed Queensland at the centre of the growing industry.
"We are now a leading player in the global LNG market," Ms Bligh said in a statement.
During the peak construction phase, the project would have a workforce of 8,500 and
employ a further 1,000 people once operational, she said.
Under the first phase of the project, two trains will produce about 7.4Mtpa of LNG.
BG Group has previously requested permitting for an expansion to a three-train,
12Mtpa operation under the second stage of the project.
Subject to factors including proving up a sufficient resource, and securing
regulatory approvals and customers, construction for the expansion could start in
2018, a BG spokesman told AAP.
Until now, Australia's single biggest trade deal between two entities was Chevron
Corporation agreeing to sell $90 billion worth of LNG from its Wheatstone project in
WA to Tokyo Electric Power Company in December last year.
The Wheatstone deal, although worth more, is so far only a heads of agreement and
has not yet been made binding.
In volume terms, the Wheatstone agreement is larger at 82 million tonnes over a
contract of up to 20 years, while the BG Group deal totals 72 million tonnes over 20
years.
Prior to the Wheatstone agreement, Australia's largest trade deal between two
entities was ExxonMobil's $50 billion sales contract with PetroChina Company Ltd in
August 2009 for LNG from the Chevron-operated Gorgon project in WA.
Among several other large LNG projects planned in the Gladstone region is Royal
Dutch Shell's LNG processing facility on Curtis Island.
Shell hopes to feed the plant with reserves and resources acquired through the
proposed multi-billion-dollar joint takeover with PetroChina of CSG producer Arrow
Energy Ltd.
BG Group's plans for the Curtis LNG project were propelled by the $5 billion
takeover of CSG firm Queensland Gas Company Ltd in 2008.