coal seam gas consolidation

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Reuters

Energy retailer Origin Energy Ltd and its partner, US oil major ConocoPhillips, have teamed up with Britain's BG Group in Australia's booming coal-seam gas sector, where consolidation pressures are building.

Under the new partnership, Origin and ConocoPhillips will sell gas extracted from coal deposits in Queensland to a BG's mutli-billion-dollar liquefied natural gas project planned for the same region, Origin said on Thursday.

Origin's existing joint venture with ConocoPhillips, known as Australia Pacific LNG, expects to sell around 190 petajoules of gas to BG over an initial ramp-up period of about two years.

Annual sales volumes will reduce to about 25 petajoules thereafter, over the balance of the 20 year contract period.

Consolidation pressure is intensifying in the sector, with five rival projects rushing to build multi-billion LNG plants around Queensland's Gladstone port area. The BG plant would produce 8.5 million tonnes of LNG a year.

"The transaction evidences the importance of project cooperation," Origin managing director Grant King said in a statement announcing the deal between Australia Pacific LNG and BG's coal-seam gas subsidiary, QGC.

"It supports the development of both Australia Pacific LNG and QGC's LNG projects by assisting in the efficient development of reserves and management of gas production."

Origin struck a $8 billion joint venture with US major ConocoPhillips last September to develop a LNG project.