BG Group has sold a quarter of its massive Queensland Curtis LNG project to China's CNOOC for $1.9 billion, while providing a downbeat assessment of its oil and gas production for 2013.
The sale will increase the interest of the China National Offshore Oil Corporation (CNOOC) in the first of two "trains" or liquefaction units to be built on Curtis Island from 10% to 50% - effectively a quarter of the LNG project.
CNOOC will also take a 25% stake in certain Bowen and Surat Basin fields, which will supply coal seam gas to the LNG plant.
BG also announced a new gas sale to CNOOC, five million tonnes a year, partly supplied by the Queensland Curtis LNG project, which is being managed by BG's Australian subsidiary QGC as operator and majority owner.
BG said the CNOOC deal would be conditional on government and regulatory approvals, which would include that of the Foreign Investment Review Board.
BG had flagged a selldown of its stake in QCLNG as part of a rationalisation of its global assets.
"Our agreement today to sell an interest in part of the QCLNG project to CNOOC means that we have now completed or reached asset sales agreements that should release a total of $US7.6 billion of capital by mid-2013," chief executive Frank Chapman said.
Earlier in the year, BG suffered a $US5bn cost blowout on QCLNG as it was hit by a higher Australian dollar and construction inflation.
Last night, chief executive Frank Chapman said the project was on schedule and budget.
"In Australia, we continue to make good progress with our Queensland Curtis LNG project, keeping it on track for first LNG in 2014," he said.
"We now have contracts and other agreements in place for more than 90% of the project scope to 2014, and we reconfirm the $US20.4b capital budget."
Announcement of the sale came as BG reported its September quarter earnings, which triggered a 14% drop in its share price - a record one-day fall for the stock - after Mr Chapman said production would be flat next year.
The deal comes amid concerns that the flow and size of Chinese investments in the resources sector are dropping.
According to a recent King Wood Mallesons study, only eight deals involving Chinese companies had been struck this year, half the level of two years ago.
Of recent Chinese bids for Australian mining companies, there has been a focus on companies with assets in Africa rather than Australia, which China is more and more seeing as a tougher place to do business.
Under the terms of agreement:
- CNOOC will acquire a 40% equity interest in QCLNG Train 1, increasing its equity ownership from 10% to 50%.
- CNOOC will acquire a 20% equity interest in the reserves and resources of certain BG Group tenements in the Walloons Fairway region of the Surat Basin, Queensland, increasing its equity ownership from 5% to 25%.
- CNOOC will acquire a 25% working interest in certain upstream tenements held by BG Group in the Bowen Basin, Queensland.
- BG Group and CNOOC will jointly invest in the construction of two LNG ships in China, adding to the two ships already committed under the LNG agreements signed in March 2010.
- CNOOC will have the option to participate as a 25% partner in the first of any potential expansion trains at QCLNG.
- BG Group's Australian business QGC Pty Limited will remain operator and retain majority ownership of the QCLNG project.
- BG Group will retain about 74% of its original interest in the upstream resource and related infrastructure; 100% of the project's common facilities on Curtis Island (LNG tanks, jetty); and the 540km natural gas pipeline network linking the gas fields to Curtis Island, which together represent about 30% of the estimated 2011-2014 project spend.