BG Group has signed a liquefied natural gas (LNG) Project Development Agreement with one of China's leading integrated energy companies, China National Offshore Oil Corporation and its affiliates (CNOOC), focused on BG Group's Queensland Curtis LNG (QCLNG) Project in Australia.

The agreement sets out the basis on which: • CNOOC will purchase 3.6 million tonnes per annum (mtpa) of LNG for a period of 20 years from the start-up of QCLNG, which is being developed by QGC - a BG Group business; • CNOOC will purchase 5% of BG Group's interest in the reserves and resources of certain tenements in the Walloons Fairway of the Surat Basin in Queensland; • CNOOC will become a 10% equity investor in one of the two liquefaction trains which will form the first phase of the QCLNG development at Gladstone in Queensland; and • BG Group and CNOOC will jointly participate in a consortium formed to construct two LNG ships in China that would be owned by the consortium.

BG Group and CNOOC intend to complete negotiations and execute fully-termed transaction documents prior to BG Group's final investment decision, expected in 2010, to sanction the QCLNG Project.

The agreement was signed in Beijing on Tuesday, 12 May 2009, by the CNOOC President Fu Chengyu and the BG Group Chief Executive Frank Chapman. The significant transactions contemplated by the agreement will be conditional on applicable government and regulatory approvals.

BG Group and CNOOC have been in partnership in offshore exploration in China since 2006. In 2008, BG Group and CNOOC signed a Memorandum of Understanding under which the two companies agreed to explore opportunities for strategic cooperation.

QCLNG firmly underpinned by BG Group global LNG supply agreements In June 2007, BG Group signed a 25-year agreement to supply Chile's first LNG import terminal, and in April 2008 BG Group was selected as the LNG aggregator for Singapore for a period of up to 20 years. Upon execution of the fully-termed transaction documents with CNOOC, BG Group's LNG supply commitments with partners and customers in Chile, Singapore and China will account for up to 8.3 mtpa, firmly underpinning development of the two-train first phase of the QCLNG Project.

BG Group Chief Executive Frank Chapman said, "This agreement is another important milestone in the development of the Queensland Curtis LNG Project. It builds on an already strong and productive relationship established with CNOOC. We look forward to working with our CNOOC partners as we drive forward our plans to establish QCLNG in the vanguard of a new world-class LNG industry in Eastern Australia."

Tags: BG Group, CNOOC Limited