Singapore (Platts)--27May2011/532 am EDT/932 GMT

Australia's Santos has begun construction of its Gladstone LNG plant on Curtis Island off Queensland, signaling the launch of the country's latest mega-project aimed at meeting the needs of an energy-hungry Asia, the company said in a statement posted to the Australian Securities Exchange Friday.

"The growing demand for natural gas in Asia is driven by the region's need for cleaner, secure, safe and reliable energy -- and that's what GLNG will provide," said Santos Chief Executive David Knox. "Curtis Island is the engine room for the whole project. This is where coal seam gas from Queensland's world-class fields will be converted to LNG and exported to Asia."

Knox said the start of work on the GLNG plant is the culmination of three years of planning and preparation. GLNG alone will supply 11% of South Korea's domestic gas needs and 9% of Malaysia's gas consumption.

The consortium has already begun work on temporary and permanent logistics facilities on the mainland at the Port of Gladstone.

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Santos and its partners made their final investment decision on the 7.8 million mt/year project in January. First shipments from the two-train projects are slated for 2015.

GLNG was the second coalseam gas-based LNG project to move into development. UK-based gas major BG Group gave the go-ahead for a $15 billion coalseam gas-to-LNG project on Curtis Island at the end of October last year. BG's Queensland Curtis LNG project will produce 8.5 million mt/year of LNG and is expected to start up in 2014.

Santos' $16 billion project was officially launched in a ceremony attended by Prime Minister Julia Gillard, Queensland Premier Anna Bligh and officials of partners Petronas, Korea Gas Corporation and Total. Santos holds a 30% stake in the GLNG project with France's Total (27.5%), Malaysia's Petronas (27.5%) and Kogas (15%).

This ownership structure took shape last year after Santos agreed to sell Kogas and Total a 7.5% stake each in the project. In parallel, Petronas also agreed to sell 7.5% of its GLNG equity to Kogas.

Kogas, the world's largest single buyer of LNG, also signed an agreement to lift 3.5 million mt/year of LNG from the project. Kogas' 20-year offtake agreement provides for 1.7 million mt/year of the contracted volumes to be delivered from GLNG train one and 1.8 million mt/year from train two.

Petronas also has a 20-year agreement to buy 3.5 million mt/year of LNG from the GLNG project, of which 1.8 million mt/year would come from train one and 1.7 million mt/year from train two.

--Thomas Hogue, thomas_hogue@platts.com