http://www.guardian.co.uk/business/2010/oct/31/bg-launches-gas-liquify-coal-project-australia
The
scheme, the company's biggest investment to date, is the first of a series of
'coal seam methane' initiatives in eastern Australia
BG Group will spend $15bn (£9.3bn)
on the world's first project to liquify and ship gas produced from coal deposits, the natural gas
company's biggest ever investment, it was announced today .
The 20-year Queensland Curtis
scheme is the first of a clutch of "coal seam methane" projects in
eastern Australia to get the
go-ahead, and will underline Australia's growing importance as a supplier of
natural resources to South East Asia. It will involve building a 540km
underground pipeline in Queensland which will link the gas producing coal
deposits to a new terminal near Gladstone, on the east coast, which will
liquify the gas for export by tanker.
BG will give more details
when it reports third quarter results tomorrow. An 11% year on year increase in
net income to $866m is forecast. BP is also reporting its delayed third quarter
results tomorrow. Analysts expect that the ongoing costs of the Deepwater
Horizon disaster will result in a slight fall in profits, compared to an 88%
rise reported by Shell last week.
The BG project is scheduled
to begin operation in 2014, producing 8.5m tonnes of liquified natural gas
(LNG) each year initially, equivalent to one 10th of the gas consumed in the
UK.
State-owned China National
Offshore Oil Corporation (CNOOC) has signed the biggest supply contract with
BG, and will buy 3.6m tonnes of LNG each year for 20 years. CNOOC will also
take a 10% stake in the first phase of the project and invest with BG to build
two new LNG cargo ships in China to be used in the project.
The Australian government
finally sanctioned the Queensland Curtis project last month, along with a rival
project near Gladstone put forward by a joint venture between Santos, Petronas,
and Total.
BG chief executive Frank
Chapman said: "The decision represents the realisation of a pivotal
strategic objective for BG Group – to further the globalisation of our
LNG business by establishing a new and material source of equity LNG in the
Asia-Pacific arena. Today's sanction is also a significant milestone on the
road to delivery of the group's growth agenda over the decade ahead."
The process of producing gas
from underground coal seams has attracted opposition from some
environmentalists and farmers in Australia over concerns that it will pollute
the water table in a country already facing severe water shortages. Vast
amounts of trapped salty water are released along with the gas when the coal
seams are drilled into. At the peak of production in 2014, BG estimates that
190m litres of water will be released each day.
BG will build two large
desalination plants to treat the water. It has also promised to monitor
groundwater and compensate owners of bore pipes if the volume or quality
deteriorates. Some 300 conditions have been set by the federal government for
both projects, mostly concerning the protection of groundwater.
Technology improvements
allowing coal seam gas to be converted into LNG, and a burgeoning market for
LNG gas, particularly in Asia, has made such projects more attractive. In July,
Australia's coal seam gas company Arrow Energy agreed to a £2bn takeover
by Shell and PetroChina. Analysts at Merrill Lynch said they expected the
market for LNG will become tighter after 2012 as demand rises, which could
justify BG's latest move.
George
Marshall,
Director
of Projects,
Climate
Outreach Information Network
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