A proposed A$8 billion (US$7.665 billion) liquefied natural gas (LNG) joint venture between Queensland Gas Company Ltd (ASX:QGC) and BG Group Plc will undergo an 18-month environmental impact assessment after the project was deemed significant by the Queensland government.

The Queensland Curtis LNG project ranks at one of the nation's single-largest capital investments and will be a world first, using coal seam gas (CSG) from Queensland's Surat Basin to feed an LNG plant.

It will have to comply with federal and state environmental legislation, having been deemed a project of significance.

Environmental studies will examine land, water, air, noise and visual impacts plus social and economic effects on the LNG plant.

The project involves an expansion of QGC's Surat Basin gas production operations near Chinchilla in Qld and the development of a 380km pipeline to Gladstone, which is near where an LNG export plant is proposed at Curtis Island.

The project will supply 3 million to 4 million tonnes of LNG a year for export and domestic markets.

There is potential to expand export output to as much as 12 million tonnes a year, subject to additional gas reserves.

A final investment decision is expected in early 2010 and first production from the new plant is scheduled for the end of 2013.

BG Group Australia managing director David Maxwell said benefits of the project included the provision of a clean and efficient energy source and creation of more than 4,400 jobs.

"More broadly, it represents a significant investment in Queensland's gas industry to unlock supply options, allowing Australia's gas market to grow," he said.

QGC managing director Richard Cottee said the recognition of CSG as an important energy commodity would open more opportunities for gas producers and meant greater choice for consumers.

Water is produced as a byproduct of CSG production and the project will investigate options for its use, which might benefit drought-affected communities in southern Queensland.

BG Group is attempting to take over Origin Energy Ltd (ASX:ORG), Australia's second-largest power retailer, which has formally rejected the A$13.7 billion bid.

BG Group, the UK's third-largest natural gas producer, launched its hostile bid of A$15.50 cash per share last month.

BG Group aims to secure Origin's vast gas resources in eastern Australia to feed the Queensland Curtis LNG plant.

Shares in QGC closed down two cents at A$4.85, while Origin's shares finished 13 cents weaker at A$16.15.


(C) 2008 Asia Pulse Pte Ltd.