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Asia: Australia Pacific LNG, Sinopec sign binding LNG offtake deal

https://www.chemnet.com   Apr 22,2011 Platts
Australia Pacific LNG has signed a binding agreement to supply Chinese state-owned giant China Petroleum & Chemical Corporation, known as Sinopec, with 4.3 million mt/year of LNG from its proposed coalseam gas-based project on Curtis Island in the east coast city of Gladstone, the company said Thursday.

Sinopec has also agreed to take a 15% interest in Australia Pacific LNG for a net consideration of $1.5 billion. The deal would reduce integrated Australian energy company Origin Energy's and US-based oil major ConocoPhillips' stakes in Australia Pacific LNG to 42.5% each, from 50% currently.

The offtake agreement with Sinopec was first unveiled under a heads of agreement signed in February. The deal would run for 20 years from 2015.

"Today marks an important milestone in the development of the Australia Pacific LNG project and represents the largest LNG supply agreement in Australian history by annual volume," Origin Managing Director Grant King said in a statement. "These agreements are testament to the strength of the Australia Pacific LNG project, which is based on Australia's largest coalseam gas reserves and resources together with ConocoPhillips' proven Cascade LNG technology that is well-suited to a CSG application."

ConocoPhillips Senior Vice President Exploration and Production Ryan Lance added that Australia Pacific LNG remained in discussions with other customers to secure offtake agreements.

The deal would "help Sinopec diversify its natural gas supply and meet the rapidly increasing demand of customers in China," said Zhang Yaocang, vice president of Sinopec Group and vice chairman of Sinopec Corporation. "Sinopec continues looking for more cooperation opportunities in Australia," he added.

The LNG from Australia Pacific LNG will underpin Sinopec's yet-to-be constructed Guangxi receiving terminal and could also be directed to other LNG import and regasification terminals in China.

Three LNG receiving terminals are already in operation in China, and a raft of new facilities are either under construction or proposed, including Sinopec's planned 5 million mt/year operation in Shantou City. Sinopec has already contracted to take 2 million mt/year of LNG from the ExxonMobil-led Papua New Guinea LNG project, scheduled to start producing 6.6 million mt/year from 2014.

Australia Pacific LNG, which already provides 40% of domestic gas demand in the eastern state of Queensland, is working toward making a final investment decision this year on the first two trains of its project on Curtis Island, which would produce 9 million mt/year. The company's site on the island has received environmental approvals for a A$35 billion ($37.2 billion) project comprising four trains producing a total of 18 million mt/year of LNG.

In addition to the plant on Curtis Island, Australia Pacific LNG's project involves further development of its coalseam gas resources in Queensland's Surat and Bowen basins, and construction of a 450 km (279 mile) underground pipeline from the gas fields to Gladstone.

The agreements with Sinopec are subject to approval by the Chinese government and Australia's Foreign Investment Review Board, as well as FID being taken.

Two other coalseam gas-to-LNG projects are already being developed on Curtis Island, by UK gas major BG Group's QGC subsidiary and a consortium headed by Australian exploration and production company Santos. BG is building a $15 billion, 8.5 million mt/year LNG plant, targeted for startup in 2014, and the Santos-led group, which includes Petronas, Total and Korea Gas Corporation, has begun work on a $16 billion, 7.8 million mt/year facility, aiming for startup in 2015.

A fourth world-scale project is being planned for the Curtis Island LNG hub by Arrow Energy, acquired last year by Shell and PetroChina. Arrow is eyeing a final investment decision on its 8 million mt/year plant in 2012.

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