Origin announces gas supply deal with QCLNG owner BG Group

Origin Energy has inked a deal with BG Group’s Curtis Island LNG project which will see the company deliver 30 petajoules of gas over two years.

The conditional gas sales agreement allows for Origin to supply BG-owned QGC with up to 30 petajoules of gas in calendar year 2014 and 2015 at oil-linked pricing.

However, Origin has the option to call back volumes of gas during periods of high east coast gas or electricity market demand.

Origin chief for Energy Markets, Frank Calabria, said the deal provides the company with a chance to leverage its diverse gas portfolio.

"The agreement highlights the strength and flexibility of Origin's portfolio of fuel resources, which position the company ideally to meet domestic and international demand for gas," Calabria said.

There has been growing speculation that Queensland's coal seams are not producing enough gas for Gladstone's three LNG export plants.

As Australian Mining reported last week, doubts have been raised that many wells are not meeting production expectations.

The calls comes as a former executive for one of the projects told The Australian that the gas fields’ "sweet spots" had not been as large as anticipated.

While it has been reported that a number of dry wells have been an issue for another proponent.

However, the claims have been rubbished by the three proponents running the LNG projects at Gladstone.

A Santos spokesman said drilling activity for the Santos Gladstone LNG project was on track and delivering consistent results.

The LNG facilities being constructed on Curtis Island represent a $70 billion investment by their owners Santos, BG Group and Origin Energy/ConocoPhillips and will need thousands of upstream CSG wells to feed them

QCLNG is the most advanced of the LNG projects on Curtis Island, with first gas expected in 2014

The Origin Energy/ConocoPhillips Australia Pacific LNG project is expected to come on line in 2015.

The new deal comes as the three companies in charge of delivering the LNG projects start to team-up to control increasingly high costs.

In July Santos GLNG and QGC signed an agreement that will see them share gas infrastructure, with both projects’ major pipelines connected in two places.

“Having two interconnects provides additional flexibility over the lifetime of both projects. It gives more options to the plant operators for moving gas,” Santos Vice President GLNG Downstream Rod Duke said.

“Ultimately it means the two companies will be able to buy, sell and swap gas at these points during scheduled and unscheduled events, therefore maximising plant productivity.”

Duke said the agreement between the companies reflects how collaboration is important in the LNG market.

John Anderson, the head of Santos's operations in Western Australia and the Northern Territory has previously warned that a high-cost environment meant companies had to work more closely together.

"We need to start seeing more gas going through existing facilities," he said.

"That means there needs to be conversations around what are fair and reasonable commercial terms. But I think there's an enormous opportunity for Australia if it captures that issue of collaboration."

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