Under the terms of the agreement, CNOOC will acquire a 5 per cent interest, valued at approximately $298 million, in certain BG Group tenements in Queensland’s Surat Basin.

CNOOC will also acquire a 10 per cent interest in the first LNG train of the development, paying BG Group 10 per cent of the costs incurred in respect to the train at the time of the final investment decision.

BG Group may supply CNOOC with LNG from its global LNG portfolio. The two companies have also agreed to participate in a consortium to construct two LNG ships in China.

All of the agreements are conditional upon Chinese, Queensland and Australian government approvals and upon BG Group making a final investment decision. The decision is expected in late 2010.

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Queensland Premier Anna Bligh said that the deal, the world’s largest LNG contract based on coal seam gas (CSG), would be worth $60 billion in export activity.

“It’s an indication of just how quickly this industry is growing in terms of BG Group’s commitment to development in Queensland that just two years ago they had three employees in the state – today there are 700,” Ms Bligh said.

QCLNG is underpinned by supply agreements for up to 8.3 MMt/a of LNG, including the agreement with CNOOC, a supply agreement for 1.7 MMt/a over 21 years to Chile and a supply agreement for 3 MMt/a over 20 years to Singapore.

The QCLNG Project involves an $8 billion onshore CSG to LNG production and export facility on the Queensland coast, with the supply of 190 PJ/a of CSG from QGC’s Surat Basin tenements to be carried via a 380 kilometre pipeline to the processing facilities on Curtis Island, near Gladstone.