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BG Group will sell QCLNG Pipeline subsidiary to APA Group

World Coal,

British gas giant, BG Group, has agreed to sell its wholly-owned QCLNG Pipeline subsidiary in Australia to APA Group for US$5 billion.

APA Group is Australia’s biggest gas transporter.

QCLNG Pipeline owns a 543 km stretch of pipeline that links coalbed methane (CBM) fields in southern Queensland to the CBM – LNG export terminal at Curtis Island.

The central processing plants and field compression stations have been constructed during the last two and a half years by 1500 engineers, civil works contractors, mechanics, welders, electricians, and others.

CBM gas enters the system at a significant pressure of 10,000 kPa.

Once the CBM gas reaches the LNG plant, the gas will be chilled to a liquid for delivery to markets around the world – with China one of the most likely destination – on purpose build ships.

BG Group said the deal is expected to be completed in the first six months of next year and is conditional on the start of commercial LNG deliveries from the CBM – LNG export facility at Gladstone.

In August, BG Group said it expected to finalise a roughly US$4 billion sale of gas pipelines in Australia’s Queensland state by Christmas.

The sale of the CBM pipeline, which takes gas pumped from coal seams in the Surat Basin to LNG trains at Curtis Island, is the largest sale by BG since it announced plans to look at asset sales across the globe earlier this year.

The Curtis Island project is the first of three large LNG export projects due to begin production over the next twelve months.

Andrew Gould, interim executive chairman of BG Group, said: “We are pleased to have entered into an agreement for the sale of this high-quality infrastructure with a bidder the calibre of APA Group.

The sale of the QCLNG pipeline is in line with our strategy to focus on BG Group's core areas of oil and gas exploration and production and LNG.”

“The timing reflects QCLNG's advanced stage of development; we are now on the verge of delivering the world's first large-scale project using natural gas from coal seams as a feedstock for LNG,” Gould added.

The deal should net the gas group around US$2.7 billion in profit – some of this will be partly offset by a tax impairment, making the final profit about US$2 billion.

The QCLNG underground pipeline is currently valued at US$1.6 billion and is expected to deliver earnings before interest, tax, depreciation and amortisation of about US$390 million in 2016.

Analysts say the deal reflects the strategic significance of the pipeline, and demonstrates the dramatic shift in the nature and geography of the gas sector that is about to occur as three giant CBM-fed plants on Curtis Island progressively come on stream.

APA will have the option, twelve months after the deal is completed, to integrate the CBM pipeline with their east cost pipeline network.

Some analysts have suggested that the sale may set the scene for similar pipeline divestments by the two other LNG projects in Queensland, Santos's US$18.5 billion GLNG venture, and Origin Energy's Australia Pacific LNG project.

Written by Sam Dodson

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