The Minister for Resources and Energy, Martin Ferguson AM MP, today witnessed in Beijing the signing of the world's first fully-termed sales and purchase agreement for LNG sourced from coal seam gas.
The deal will see BG Group supply 3.6 million tonnes of LNG per annum to the China National Offshore Oil Corporation (CNOOC) for 20 years from 2014 from its proposed Queensland Curtis LNG project at Gladstone.
In volume terms, this is the biggest single company-to-company LNG contract in Australia's history, totalling 72 million tonnes over 20 years.
Minister Ferguson said: "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.
"Queensland is already a resources powerhouse and an LNG industry will diversify its economy and generate further jobs and export wealth for Queenslanders and the nation as a whole."
Geoscience Australia estimates Queensland's coal seam gas resources at around 150 trillion cubic feet: enough to power the whole of Queensland for more than 1000 years.
Minister Ferguson said: "This contract is an unprecedented vote of confidence in Queensland's new coal seam gas-based LNG industry.
"Australia is one of only three net energy-exporting countries in the OECD and this deal is further evidence of Australia's vital role in global energy security in the 21st Century.
"It also further demonstrates Australia's attractiveness as an internationally competitive and safe destination for global capital."
BG will process the LNG at the Queensland Curtis LNG Project on Curtis Island at Gladstone. The project is operated by BG's Australian subsidiary, QGC.
Current plans are for two LNG production trains of up to four million tonnes a year, and possibly a third.
A final investment decision on the project is expected this year.
BG has already committed to A$3.5 billion for long-lead items and has awarded major contracts for the LNG plant and for 550km of 42" pipe to transport gas from the Surat Basin to Gladstone.
The project involves an estimated investment of more than A$10 billion and will generate 5,000 jobs during construction and 1,000 long-term operations jobs.
BG estimates its LNG business will generate A$32 billion in value-added activity for Queensland by 2021.
QGC supplied about 20 per cent of Queensland's domestic gas demand in 2009 and will continue to meet its long-term domestic market obligations, including a 15-year A$100 million contract announced last week in which it will provide gas for a micro-LNG project at Chinchilla for heavy haulage transport.
Subject to the usual foreign investment and other regulatory approval processes, the deal signed today will see CNOOC buy an interest in BG's coal seam gas resources in Queensland's Surat Basin and become an equity partner in one of the two LNG trains at Gladstone.
For the BG Group, this will be its largest Australian investment and we look forward to a long and mutually prosperous relationship.
CNOOC is already a welcome and important member of Australia's business community with an equity stake in the gas resources of the North West Shelf Gas Project and we are pleased to see its investment in Australia growing.
CNOOC was indeed the very first buyer of Australian LNG for the China market with first deliveries in 2006.
Mineral and energy exports account for three-quarters of Australia's merchandise exports to China, worth more than $33 billion last financial year. One-third of Australia's mineral exports go to China and China is already Australia's second-largest trading partner for LNG.
Minister Ferguson will meet with Dr Wan Gang, the Minister for Science and Technology, and Mr Zhang Guobao, Vice Chairman of the National Development and Reform Commission, while in Beijing to discuss the strong bilateral resources and energy relationship.
Minister Ferguson said: "Queensland's proposed coal seam gas LNG projects have the potential to generate more than A$50 billion in investment, hundreds of billions in exports, and tens of thousands of Queensland jobs."