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Tokyo Gas eyes QCLNG project

Tokyo Gas is eyeing a stake of up to 10% in BG Group’s Queensland Curtis coal-bed methane (CBM) to liquefied natural gas (LNG) export project in Australia

The deal includes the purchase of 1 million tonnes per year (t/y) of LNG from the 8.5 million t/y project under development in Queensland.

Tokyo Gas executive vice president, Shigeru Muraki, said the transaction will be announced very soon, according to a Wall Street Journal report.

If successful, the deal will help the UK gas group meet ballooning project costs. In May, BG said development costs had risen to $20.4 billion from an estimated $15 billion due to a higher Australian dollar, coupled with increased labour and raw material expenses.

In March, BG kicked off a process to sell up to a 20% interest in the venture, estimated to be worth around $2 billion, to help fund the development.

However, BG struggled to attract interest in the stake as investors remained wary of further potential cost blowouts in Australia.

BG’s chances of landing a premium price for the equity stake have not been improved by the prevalence of rivals seeking to sell. ConocoPhillips and Origin Energy are trying to sell a combined 15% share of their 9 million t/y CBM to LNG project, known as Australia Pacific LNG (APLNG).

At the end of September, the state-owned Japan Bank for International Cooperation (JBIC) signed a memorandum of understanding with BG aimed at jointly pursuing LNG projects as well as securing LNG for Japan on a long-term basis.

Under the agreement, JBIC and BG will hold regular talks on natural gas projects, which involve BG, to consider possible joint participation in the projects, as well as financial support for projects in which BG and Japanese companies are involved.

In September 2011, JBIC signed an agreement to provide a loan up to $175 million to Tokyo Gas for development of the Queensland Curtis LNG (QCLNG) project near Gladstone in eastern Australia.

The loan was JBIC's first for a CBM-based LNG project, the Japanese state energy finance arm said then.

JBIC's loan followed Tokyo Gas signing a sales and purchase agreement in March 2011 with BG to import 1.2 million t/y of LNG from the QCLNG project starting 2015.

As part of the deal, Tokyo Gas also acquired a 1.25% equity interest in some of BG's tenements in the Surat basin in Queensland, and will take a 2.5% stake in the second of QCLNG's two liquefaction trains under terms agreed in March 2010.

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