China National Offshore to sign Australian gas purchase deal with BG

State-owned offshore oil and gas company China National Offshore Oil Corp Ltd (CNOOC) will sign a binding agreement with BG Group on Wednesday to buy gas from an Australia project, a CNOOC official said.

The two companies agreed on a preliminary deal last year under which CNOOC would buy 3.6 million tonnes of liquefied natural gas (LNG) per year over 20 years from BG's Queensland Curtis LNG plant in Australia.

Based on the preliminary deal, CNOOC would also take a 10 per cent stake in one of the two LNG processing units at the BG project, as well as 5 percent equity stake in some of BG's key coal seam gas fields.

The CNOOC official did not give any detail of the agreement on Wednesday.

The deal could be worth up to A$80bn ($73.53bn), to become Australia's largest single trade deal, eclipsing the A$50bn LNG sales contract between ExxonMobil and PetroChina signed last year, the Australian Financial Review said on Wednesday without citing sources.

The agreement, if finalised, means BG has secured sales for all of the project's LNG output, paving the way for it to make a final investment decision on the A$8 billion development in the middle of this year and start production in 2014.

Environmental approvals from Australia's state and federal governments are the biggest remaining hurdles for BG before it can give the project a go-ahead.

BG said last month it would expand the planned capacity at Queensland Curtis project, which has also secured sales to Singapore and Chile, to 8.5 million tons a year, from 7.4 million tonnes a year.

The group has also committed to long lead project items worth $3bn and has awarded contractors Bechtel for engineering, procurement and construction work for the project.