BG preparing to commission first train at QCLNG project

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BG Group is poised to begin commissioning the first liquefaction train at its Queensland Curtis LNG (QCLNG) project in Australia, following the arrival of first gas from the Surat Basin gas fields in December. This means the project, located at Curtis Island in the state of Queensland, will deliver its first commercial cargo later this year.

The project is the first of a wave of new projects that will lead to Australia becoming a bigger LNG producer than Qatar sometime in the second half of this decade. It will also be the first liquefaction project in the world to source its gas from what the Australians call coal-seam gas (CSG) fields, more commonly known elsewhere as coal-bed methane or CBM. Several other CSG-to-LNG projects are under development close to where QCLNG is located, but they are not due to start up until 2015 and beyond.

Tough target: Delivery of first gas onto the island marks the completion of a two-year task to lay more than 46,000 lengths of one-metre diameter steel pipe over 540 kilometres – the “longest large-diameter buried pipeline in Australia”, claims BG. Arrival of first gas means that commissioning work can begin on the first of two 4.25 mtpa LNG trains. Commissioning is expected to begin in the first quarter of the year.

British Gas' main Queensland Curtis LNG pipeline

The last string of the 540 km QCLNG pipeline is lowered into the ground. The pipeline, said to be “the longest large-diameter buried pipeline in Australia”, carries gas from the Surat Basin CSG fields to the liquefaction trains at Curtis Island.(Source: QGC)

"To have first gas on Curtis Island in a little over three years from project sanction is an immense achievement,” said BG’s CEO, Chris Finlayson. “Delivering this key milestone demonstrates the advanced stage of development at the world's first CSG-to-LNG project. We are now entering the final construction and commissioning phases and we remain firmly on track to deliver first commercial LNG in the second half of 2014, as scheduled.

"We have overcome many challenges along the way, and we still have more hard work in front of us, but last February I set the tough target to have first gas on Curtis Island by the end of 2013, and I am delighted that we have met it."

Completion of the project will lead to BG Group becoming the largest supplier of LNG to China, which Finlayson described as “the world’s fastest growing energy market”. In November BG and China National Offshore Oil Corporation (CNOOC) completed a number of transactions, giving CNOOC a 50% ownership in the first liquefaction train, a number of upstream equity interests, and an additional 5 mtpa of LNG supply from BG’s global portfolio.

Sales commitments: CNOOC had already contracted to take 3.6 mtpa over 20 years from the QCLNG project, which is being operated by BG’s wholly-owned Australian subsidiary, QGC. Other customers include Tokyo Gas, GNL Chile, Chubu Electric, and the Energy Market Authority of Singapore. Total sales commitments for the project amount to nearly 10 mtpa.

There is significant potential to expand QCLNG, with the construction of a third LNG train already covered by existing state and federal approvals.

Like several other new LNG projects in Australia, QCLNG will cost significantly more than the initial estimate. At the time the project was sanctioned, in October 2010, BG said it expected the first phase of the project to cost US$15 billion. According to Finlayson, the project is now expected to cost US$20.4 billion.

Australia currently has LNG production capacity of 25.1 mtpa – 17.1 mtpa at the five-train North West Shelf project, another 3.7 mtpa at the single-train Darwin project, and 4.3 mtpa at the single-train Pluto project, which started up in 2012. Numerous other projects have been sanctioned in previous years and several others are still in the planning stages. Sanctioned projects include several more CSG-to-LNG plants, Shell’s Prelude floating LNG project, and a number of more traditional projects, such as Gorgon, Wheatstone and Ichthys.

Overtaking Qatar: Australia passed a significant milestone two years ago when the Japanese company INPEX and its partners announced  they had reached final investment decision on their Ichthys project. It meant that from that point on Australia had more LNG production capacity in operation and under construction than Qatar, which celebrated reaching 77 mtpa of capacity in late 2010. Qatar currently has a moratorium on further development of the gas resources in its North Field.

As the projects now under construction come on stream over the coming four to five years, Australia’s LNG production capacity will approach and then exceed Qatar’s as it nears the 86 mtpa of capacity that has been built and sanctioned. Analysis conducted by LNG Business Review and published in early 2012 indicates that Australia could overtake Qatar as soon as 2018, though 2019 looks more likely. Even allowing for a year or two of delay in most of the new projects, Australia will overtake Qatar by 2020.

This, of course, assumes that the projects now under construction in Australia do not run into major difficulties. That said, there are no recent instances of a natural gas liquefaction project falling apart post-FID.

By Alex Forbes