BG Group holds the line on costs
All's well: BG Group says it has plenty of gas.
AFTER unveiling a $US5 billion blowout earlier this year, BG Group is confident costs are under control at its huge Queensland Curtis LNG project, and is pushing to expand the plant.
BG's executive director and global LNG chief, Martin Houston, at a media briefing in Sydney on Monday, said about 45 per cent of construction by value at QCLNG was done, and agreement had been reached on 90 per cent of the contracts.
BG was drilling about 50 coal seam gas wells in Queensland a month, and had about 1400 land access agreements in place, he said.
''We're now very confident about the cost base we have here and delivering this both on time and on the new budget,'' Mr Houston said.
In May, BG said the cost of the two-train QCLNG project had risen 19 per cent to $US20.4 billion, mainly due to the high Australian dollar.
Mr Houston said a third LNG train was usually the best to develop, enjoying a cost advantage over earlier trains because additional tanks, jetties and other common infrastructure did not need to be built.
BG's recent gas sale to China's CNOOC included an option to take 25 per cent of a third train at QCLNG and Chinese gas demand was ''almost insatiable'', Mr Houston said.
''We'd like to get T3 done,'' he said.
Mr Houston denied BG was short of gas in Australia, saying the company had a resource of 23 trillion cubic feet including proven and probable reserves of 9.9 tcf. BG believes further exploration will yield an additional 1.2 tcf of coal seam gas in the Surat Basin, another 4.7 tcf in the Bowen Basin, and another 2.3 tcf in tight sands between 2-4 kilometres deep, also in the Bowen.
At a cost of more than $US12 per million British thermal units (mmbtu), delivered into Tokyo Bay, BG viewed Australia as the most expensive source of gas, above the average of $US10/mmbtu for LNG from Mozambique, the US Gulf coast, Canada, Russia or Alaska. Construction costs of LNG plant were $US500-600 per tonne of capacity in the US, but were $US1200-1400 per tonne in Australia.
But while Australia was suffering cost inflation Mr Houston said it was difficult to say where else large amounts of gas would come from, with exports from the US facing domestic political constraints and projects in east Africa starting from scratch.
''Mozambique and Tanzania represent development of projects in areas where, at the moment, there is no institutional capability with which to develop those.
''We're a big player in Tanzania with around 10tcf of gas but the speed at which we can promote that is to some degree the speed at which the government can work opposite us.
''Australia has a real opportunity, the question is, can it meet the market in terms of price.''
There has been speculation recently that Shell/Petrochina's as-yet-unsanctioned Arrow LNG project could be rolled into one or the other of the three coal seam gas-to-LNG projects at Gladstone, behind QCLNG, Santos' Gladstone LNG and the Origin Energy-led Australia Pacific LNG.
Mr Houston said BG was open to discussions and collaboration.