Chubu Electric and BG Group sign HOA for LNG sale and purchase

Chubu Electric Power Co., Inc. ("Chubu Electric") announced it had reached agreement for basic terms and conditions to purchase LNG with BG Group plc ("BG Group").

The agreement relates to Chubu Electric's purchase of LNG supplied from BG Group's global LNG portfolio. It is the first time that Chubu Electric has agreed to LNG portfolio supplies (which do not limit the source of supply to a particular project) under a long term contract.

BG Group's global LNG portfolio includes the Queensland Curtis LNG ("QCLNG") project which will supply super lean LNG produced from coal bed methane ("CBM"*1) gas. Chubu Electric is the first Japanese electric power company to agree to purchase LNG derived from CBM on a long term basis.

Chubu Electric is to purchase up to 120 cargoes (ie. up to 8.4 million tonnes if a 140,000 cubic metre capacity vessel is used) over 20 years commencing 2014 on Ex-Ship basis.

Chubu Electric believes this LNG supply from BG Group's portfolio and the high potentiality of the Australian CBM project will contribute to its stable LNG procurement.

Chubu Electric and BG Group intend to complete and execute the fully termed LNG sales and purchase agreement in the first half of 2011.

1  Outline of the agreement

Seller	BG Group
Buyer	Chubu Electric Power Co., Inc.
Term	20 years commencing 2014
Quantity	Up to 120 cargoes over the term
Delivery	Ex-Ship basis

2 Profile of BG Group

Company name	BG Group plc
Address	100 Thames Valley Park Drive, Reading Berkshire, UK
Chief Executive Officer	Mr. Frank Chapman
Business	BG Group has a broad portfolio of exploration and production, Liquefied Natural Gas (LNG), transmission and distribution and power generation business interests. It combines a deep understanding of gas markets with a proven track record in finding and commercializing reserves.

3  QCLNG

QGC Pty Limited is the Australian subsidiary of BG Group that is developing the Queensland Curtis LNG Project. QGC is a leading Australian coal seam gas explorer and producer focused on supplying gas to domestic and international markets. Queensland Curtis LNG, a priority project for QGC, involves expanding exploration and development in southern and central Queensland and transporting gas through a 540km underground pipeline network to Curtis Island near Gladstone where it will be liquefied.

Gas fields	CBM tenements centered around Surat basin in Queensland, Australia
Reserves	Approx. 17.3 tcf (Approx. 460bcm)
Production capacity	Approx. 8.5MPTA (2 trains)
Production start-up	2014

 

*1 CBM

CBM is categorized as unconventional gas. It consists mainly of methane and was created naturally when the coal was formed. The gas is trapped in the coal in tiny fractures or voids, typically 300-600 metres underground. The gas is held in place by water pressure and is extracted via wells drilled through the coal seams. When the water is pumped out, natural gas is released from the coal. The gas is then processed to remove water and piped to compression plants for injection into gas transmission pipelines.

It is said that there are rich CBM reserves in the world (8000-9000tcf), especially in Australia (350tcf) as well as the US, Canada, China and Europe. (1tcf = 20million tons of LNG).