SYDNEY (Dow Jones)
BG Group PLC (BG.LN) said Wednesday that it has halted construction of a pipeline connecting gas fields in Queensland state to its planned US$15 billion gas export terminal on the coast due to environmental concerns.
BG's Australian unit QGC said that a failure to receive regulatory approval for its ongoing soil and species management plans could mean that it has breached conditions set out by lawmakers.
Its project is among four slated for the port of Gladstone vying to be the first in the world to convert gas trapped in coal seams to liquefied natural gas for export by tanker.
BG's and two rival projects, including a joint venture led by Australia's Santos Ltd. (STO.AU), recently received conditional environmental approval by state and federal lawmakers.
The delay to BG's venture shows that getting approval was just the first environmental hurdle that each venture will have to clear and comes amid ongoing concerns from farmers about the impact of coal seam gas mining on ground water quality.
Some of the thousands of conditions imposed on the companies require the preparation of management plans, which must be submitted to relevant regulators and approved before a development can continue.
In BG's case, it discovered four potential breaches all related to work proceeding before the approval of certain management plans by regulators, a BG spokesman said.
The company became aware of the potential breaches during an internal review after a contractor began clearing land for construction of a section of the pipeline.
"We do not believe the clearing has had an adverse impact on protected plants and animals and the potential breaches do not affect the safety of people," QGC Senior Vice President Jim Knudsen said in a statement.
"We have stopped work because we are committed to doing the right thing and we take seriously our obligations to meet more than 1,500 state and federal conditions on the Queensland Curtis LNG Project," he said.
Work will resume when the conditions are met. The BG spokesman declined to estimate when this could occur, with approval in the hands of the relevant authorities.
BG, however, said it doesn't expect the delay to have a material impact on the project's scheduled completion date of 2014.
Spokespeople for the Australian and Queensland government's environmental departments weren't able to provide immediate comment.
Apart from Santos's development with partners including Total SA (TOT), rival projects are being constructed at Gladstone by an Origin Energy Ltd. (ORG.AU) and ConocoPhillips (COP) joint venture and a partnership between Royal Dutch Shell PLC (RDSB.LN) and PetroChina Co. (PTR).
Asia utilities such as Korea Gas Corp., Tokyo Gas and China's Sinopec are among customers of the developments.
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