Australian LNG from Coal Seem Worth A$8 Billion from BG in England

Feb. 4 (Bloomberg) -- Queensland Gas Co., an Australian producer of natural gas from coal seams, jumped the most in 15 months in Sydney trading after linking with BG Group Plc for a A$8 billion ($7.2 billion) fuel-export project in Queensland.

Queensland Gas shares rose as much as 72 cents, or 21 percent, to A$4.14 on the Australian Stock Exchange, beating a gain of as much as 2.1 percent in the exchange's benchmark energy index. The stock was at A$3.87 at 12:13 p.m. local time.

Demand for liquefied natural gas is set to more than double to 400 million metric tons a year by 2015 as utilities in north Asia, Europe and the U.S. increase imports for power generation. The venture with BG doubles the value of Queensland Gas's reserves, Managing Director Richard Cottee said yesterday. BG also bought a stake in Queensland Gas and in its reserves.

``This shows that large global organizations are seeking long-term gas and are willing to pay up for it,'' said John Colnan, senior resources analyst at Shaw Stockbroking Ltd. in Sydney. ``The project is still a long way off.''

The partners plan to build a LNG facility near Gladstone with a capacity of 3 million to 4 million metric tons a year, with deliveries starting in 2013, Brisbane-based Queensland Gas said yesterday in an e-mailed statement. The investment will include the development of coal seam gas fields, a 380-kilometer (236-mile) pipeline and a production plant.

Rival Projects

Reading, U.K.-based BG Group, the U.K.'s third-largest gas producer, agreed to pay A$250 million for a 9.9 percent stake in Queensland Gas, at A$3.07 a share, and A$415 million for a 20 percent interest in the Australian company's coal seam gas assets in the Surat Basin. It will pay a further A$207 million for another 10 percent share of the acreage once the LNG project is approved or once Queensland Gas firms up 7,000 petajoules (6.6 trillion cubic feet) of reserves.

Construction of the Australian Onshore LNG project is due to start in 2010 once the partners approve the investment. While Queensland Gas has no LNG production at present, BG has 10 million tons a year of supply and 17 million tons a year of markets, including more than 2 million tons a year into Asia, Queensland Gas said today in a presentation sent to the exchange.

The project is one of four LNG ventures being proposed for the area around Gladstone, all fueled by coal seam gas. Santos Ltd., Australia's third-biggest oil and gas producer, is planning a A$7 billion project, while Japan's Sojitz Corp. and Sunshine Gas Ltd. are proposing a smaller venture. Liquefied Natural Gas Ltd. and Arrow Energy Ltd. intend to build a $400 million plant.