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Chinese offshore giant CNOOC (China National Offshore Oil Corp.) is substantially expanding its position in the Queensland Curtis LNG (QCLNG) project in Australia after agreeing to a US $1.93 billion deal with BG Group of the UK, which also will see the latter become China’s largest supplier of LNG.
BG said it had signed a heads of agreement (HOA) with CNOOC for the sale of certain interests in the QCLNG project for the figure of $1.93 billion plus the sale of LNG from BG’s global LNG portfolio. Fully-termed transaction agreements are expected to be executed in the first half of 2013, and upon closing, CNOOC will reimburse BG for its share of QCLNG project capital expenditures incurred from Jan. 1.
The interests conveyed include a stake in certain upstream tenements and the Train 1 liquefaction facility but exclude any interest in the Train 2 liquefaction facility, transmission pipeline and QCLNG common facilities, BG said in a press statement. First LNG from the QCLNG project is due to flow in 2014.
Under the LNG sale agreement, BG will supply CNOOC with 5 MMtpa of LNG for 20 years beginning in 2015, sourced from the group’s global portfolio. Combined with the 3.6 MMtpa LNG sale agreement signed with CNOOC in March 2010, BG Group’s total committed LNG sales to China will be 8.6 MMtpa – making it the largest supplier of LNG to the world’s fastest growing energy market, it said.
The transactions are conditional on applicable government and regulatory approvals.
The terms of the HOA are:
• CNOOC will acquire a 40% equity interest in QCLNG Train 1, increasing its equity ownership from 10% to 50%;
• CNOOC will acquire a 20% equity interest in the reserves and resources of certain BG Group tenements in the Walloons Fairway region of the Surat Basin, Queensland, increasing its equity ownership from 5% to 25%;
• CNOOC will acquire a 25% working interest in certain upstream tenements held by BG Group in the Bowen Basin, Queensland;
• BG Group and CNOOC will jointly invest in the construction of two LNG ships in China, adding to two ships already committed under LNG agreements signed in March 2010;
• CNOOC will have the option to participate as a 25% partner in the first of any potential expansion trains at QCLNG. BG Group’s Australian business QGC Pty Ltd. will remain operator and retain majority ownership of the QCLNG project. BG will retain:
• Around 74% of its original interest in the upstream resource and related infrastructure; and
• 100% of the project’s common facilities on Curtis Island (LNG tanks, jetty) and the 540 km gas pipeline network linking the gas fields to Curtis Island, which together represent approximately 30% of the estimated 2011-14 project spend.