Australia Pacific LNG and QGC Pty Limited (QGC), a BG Group business, have agreed a framework for the development of jointly owned coal seam gas (CSG) tenements ATP 648P and ATP 620P in South East Queensland. The parties have also entered into conditional gas sales agreements to support the development of both Australia Pacific LNG and QGC's LNG projects.
Origin's Managing Director, Grant King said, "Australia Pacific LNG and QGC have agreed to work together to efficiently develop these jointly owned resources to support both of our planned LNG projects.
"The gas sales agreements will deliver significant value to Australia Pacific LNG and Origin. They will open an export channel to market for part of Australia Pacific LNG's gas resource and bring forward its monetization.
"Australia Pacific LNG expects to sell around 190 PJ of gas over an initial ramp up period of around two years to QGC under the agreements. Annual volumes sold to QGC are expected to reduce to average 25 PJ over the balance of the initial 20 year contract period. Australia Pacific LNG will separately market the balance of its gas from these tenements for the long term.
"The transaction evidences the importance of project cooperation. It supports the development of both Australia Pacific LNG and QGC's LNG projects by assisting in the efficient development of reserves and management of gas production," King said.
The field development framework provides a mechanism for the parties to progress the technical design and conditions for the ultimate development of these jointly owned resources.
The commencement of gas sales to QGC is aligned with the start of commercial operations at QGC's Queensland Curtis LNG project (QCLNG), which is currently expected in 2014. The initial contract term for gas sales to QGC from ATP 648P is 20 years and QGC holds two extension options, each with a 5 year term. The parties have also agreed a short term gas sales agreement from ATP 620P for around two years from the commencement of commercial operations at QCLNG. This will assist both parties in managing their gas requirements as they ramp up production of their respective LNG projects. The actual volume of gas sold will depend upon field development and performance.
The field development plans and gas sales agreements are conditional on QGC making a Final Investment Decision on QCLNG.
Australia Pacific LNG is a 50:50 CSG to LNG joint venture between Origin and ConocoPhillips.
The CSG tenements are operated by QGC with Australia Pacific LNG's permit interests being 31.25% for ATP 648P and 40.625% for ATP 620P.