Search Icon

BG Group loads first LNG at Australian coal seam gas project

British energy company achieves major of objective for 2014 by exporting its first shipments from Curtis Island in Queensland

Liquified Natural Gas from Qatar has now started arriving at the Welsh port of Milford Haven
BG Group is now loading its first LNG tankers at Curtis Island

Investors in BG Group can breathe a sigh of relief after the company announced that it had loaded the first cargo from its $20bn (£12.8bn) Queensland coal seam gas LNG project in Australia.

The company had set a year-end target for lifting its first shipment of liquefied natural gas (LNG) from the project, which is the first attempt of its kind.

Unlike conventional LNG projects which convert standard natural gas into a liquid for transportation, the Queensland Curtis LNG (QCLNG) scheme relies on supplies of coal seam gas, which is locked in deposits of the black rock.

The project which has suffered cost overruns due to fluctuations in the value of the Australian dollar and the rising cost of labour and materials involves 2,000 wells spread across a giant area of 4,500 square kilometres.

The gas is then piped to a liquefaction plant in Curtis Island where it is chilled and then loaded onto giant LNG tankers for export to markets across Asia.

“This is an immense achievement which demonstrates the company’s ability to deliver a highly complex LNG project,” said Andrew Gould, interim executive chairman.

BG Group is among a group of international oil and gas companies including Royal Dutch Shell, Chevron and ExxonMobil that have invested an estimated $200bn to tap Australia's vast gas reserves, which are mainly held offshore. By 2018, the country is expected to become the world's biggest exporter of LNG - overtaking Qatar - with 84m tonnes of capacity. However, downward pressure on the price of LNG in Asia has raised concerns over the flood of new high-cost capacity that is soon expected to come on stream from Australia.

Delivering the project is a major step forward for BG Group after a tough year, which saw the company search for a new chief executive after Chris Finlayson stepped down in April having served just 16 months in the role. The company has since hired Helge Lund from Statoil but was embarrassingly forced to reduce his remuneration package due to shareholder objections.

Mr Lund starts in March next year and will immediately address investors' concerns over its pipeline of projects and potential disposals. Credit Suisse, which decreased its target price on the stock earlier this month, has raised concerns over its offshore drilling in Brazil and timetable for increasing output from the QCLNG facility to full capacity by 2016.

Some disposals have already started. The company said earlier this month that it had offloaded its Queensland gas pipeline to Australia's APA Group for $5bn.

Shares in BG Group fell back slightly in midday trading, down 0.1pc at 880 pence.

“BG Group looks to finally have some good news to round off a disappointing 2014 as its $20bn Curtis LNG project in Queensland Australia looks to wave off the first of its natural gas tankers bound for the Chinese markets,” said Alastair McCaig, Market Analyst, IG.