BG to Invest $15 Billion in Australia LNG Project

October 31, 2010, 12:40 AM EDT

(Updates with comments by BG’s Australia managing director from third paragraph.)By Nichola Saminather and James Paton

Oct. 31 (Bloomberg) -- BG Group Plc, the U.K.’s third- largest oil and gas producer, will invest $15 billion in the Curtis liquefied natural gas project in Australia over the next four years, its single biggest investment.

The project in Queensland state, which is scheduled to start fuel shipments in 2014, is among more than a dozen proposed LNG developments in Australia seeking to tap Asian demand for cleaner-burning fuel to curb emissions. BG and rival Santos Ltd. won Australian government approval for their Queensland LNG projects on Oct. 22 and must comply with more than 300 conditions to protect the environment and underground water supplies.

The Queensland Curtis LNG Project involves building an LNG plant on Curtis Island, some 450 kilometers (282 miles) north of Brisbane, a 540-kilometer underground pipeline network, and expanding production in gas fields in the state’s Surat Basin, Catherine Tanna, managing director of the company’s Australian unit, said on a conference call today.

BG has reached agreements to sell LNG to customers in China, Japan, Singapore and Chile and will also provide gas to markets in eastern Australia, the Berkshire, U.K-based company said in a statement today. The project, which will have an operating life of at least 20 years, will likely create 5,000 construction jobs over the next four years, according to the statement.

First Investment Commitment

The BG development is the first coal-seam gas-to-LNG project in Queensland to reach a final investment decision, while Adelaide-based Santos has said it plans to commit to the first phase of its Gladstone LNG venture by the end of the year. That project, with two production units, may cost A$20 billion ($19.7 billion), estimates James Bullen, a Sydney-based analyst at Bank of America Merrill Lynch.

The Curtis plant will be the most efficient in Australia and the second-most efficient in the world in terms of greenhouse gas emissions, generating about 35 percent less than other fossil fuels, Tanna said.

--Editors: Jonathan Annells, Jim McDonald

To contact the reporters on this story: Nichola Saminather in Sydney atnsaminather1@bloomberg.net James Paton in Sydney jpaton4@bloomberg.net.

To contact the editor responsible for this story: Paul Tighe at ptighe@bloomberg.net