UK's BG Group still eyeing third train at Queensland Curtis LNG project
Sydney (Platts)--7Dec2012/331 am EST/831 GMT
UK gas giant BG Group is still looking to develop a third production
train at its Queensland Curtis LNG project in eastern Australia, although the
timing of the expansion is uncertain, according to a senior company executive.
Martin Houston, BG's executive director and executive vice president and
managing director, Americas and global LNG, told a media briefing in Sydney
this week that the company has resources totaling 23 Tcf in the eastern
Australian state of Queensland. BG's proven and probable coalseam gas
reserves in the region are 9.9 Tcf.
"Certainly we have the resources there and we're systematically
developing them to supply our existing two trains and hopefully in the future
a third train," Houston said.
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BG is currently constructing a two-train LNG project on Curtis Island in
the Queensland port city of Gladstone. The plant will produce a total of 8.5
million mt/year of LNG.
"We are on track for a 2014 startup for first LNG," Houston said. "Good
progress [is being made] on the upstream. We're drilling about 50 wells a
month at the moment [and] we've got about 1,400 land access agreements in
BG raised its budget for the Queensland Curtis LNG project in May to
$20.4 billion, from $15 billion when it was approved in 2010. The increase
was mainly due to rising costs in the Australian market, where seven LNG
projects are currently under construction, including two others on Curtis
Island, and the stronger local currency.
"We are about 45% complete on value of work done [on Queensland Curtis
LNG] and we've got agreements in place for about 90% of the contracts,"
Houston said. "We adjusted our costs -- a lot of that was to do with the
strength of the Australian dollar -- but we are now very confident about the
cost base we have here, and delivering this [project] both on time and on the
DEALS WITH CNOOC
BG struck a $1.93 billion deal In late October to sell China National
Offshore Oil Corporation another 40% stake in the Queensland Curtis LNG
project, taking its total share to 50%. Under the agreement, the Chinese
state-owned giant also raised its ownership of BG's Surat Basin gas resources
from 5% to 25%.
The deal included an undertaking by CNOOC to lift an additional 5
million mt/year of LNG from BG's global portfolio starting from 2015. CNOOC
agreed to buy 3.6 million mt/year of LNG from BG in March 2010.
"In the deal that we've just concluded with CNOOC, one of the things we
provided to CNOOC was an option to take 25% in the third train," Houston
said. "The Chinese have this almost insatiable demand for gas in the future,
[and] my sense is that this is an opportunity that CNOOC will want to
prosecute quite quickly and that being the case so would we," he added.
"The third train is usually the best train to develop because it doesn't
require additional tanks, it doesn't require additional jetties, so it's cost
advantaged versus the earlier trains," Houston said.
BG estimates that the project's common facilities on Curtis Island and
the 540 km natural gas pipeline network linking the gas fields to the
liquefaction facilities represent about 30% of the estimated 2011-2014
The company would still need to complete a study of the economics of the
third train before taking a final investment decision. In addition, although
cost efficiency would favor a sequential development following on from train
two, the need to mature BG's resource base across all its supply options,
including coalseam gas in the Surat and Bowen basins, tight gas in the Bowen
Basin, and shale gas in the Cooper Basin, might require a delay.
The third train in Queensland would also have to stack up against the
company's other growth opportunities in Canada, the US and, further down the
track, Tanzania. BG is aiming to grow its LNG portfolio to 30 million mt/year
"We have a series of options and we will deploy capital and expertise
and resources to the projects which deliver us the best returns for the
growth of our business," Houston said. "We are fortunate that we have more
options than we are able to prosecute long term. So it's a case of
prioritization for us."
--Christine Forster, firstname.lastname@example.org
--Edited by Wendy Wells, email@example.com