The deal is on track for Australia’s first LNG from coal seam gas, after BOC and QGC yesterday announced a long-term gas supply agreement worth more than $100m (Australian dollars).

The newly-inked deal puts the companies on track to extend a new transport fuel industry to Queensland and completes an interstate network of LNG refuelling stations for the trucking industry.

BOC and QGC, a BG Group business, announced the contract at a function in Chinchilla, southern Queensland, attended by the Premier of Queensland, the Honourable Anna Bligh MP.

As part of the agreement, QGC will supply BOC with up to 30 petajoules of coal seam gas over 15 years.

QGC will supply gas to BOC from July 2011, putting the companies on track to become the first in Australia to produce LNG from coal seam gas, through safe and proven liquefaction technology.

To process the gas into LNG, BOC will build a market-leading micro-LNG plant similar to the one that BOC is now constructing in Westbury, Tasmania. The plant, planned to be built near QGC’s gas fields in the Surat Basin, will produce 50 tonnes of LNG per day – equivalent to 70,000 litres of diesel – for heavy transport and industry.

“This agreement heralds the extension of a new industry to Queensland based on coal seam gas where heavy transport may switch to LNG, an environmentally cleaner fuel than current alternatives,” Ms Bligh said.

“Through this agreement, Queensland will join with other states as BOC develops an innovative network of LNG refuelling stations along the east coast of Australia for vehicles converted to run on LNG.”

BOC plans to complete an interstate network of LNG refuelling stations for the trucking industry, building and operating up to eight refuelling stations from Queensland to Victoria. As a starting point in Queensland, BOC proposes to build a refuelling station on the Warrego Highway, subject to further discussions with its customers.

These stations will be supplied from BOC’s existing liquefaction plant in Victoria and the one to be built in the Surat Basin. The Victorian plant and another under construction in Tasmania are based on the use of conventional gas.

The company is seeking to begin construction of the new plant next to QGC’s Condamine Power Station, near Miles, subject to a formal development approval process, early next year. QGC plans to assist in the supply of land and utilities. BOC expects to spend at least $100m – exclusive of gas – on construction and operation during the lifetime of the project.

BOC South Pacific Managing Director Colin Isaac said the agreement marked an important step in the development of LNG, an innovative new fuel, for the transport industry.

“Using coal seam gas to create LNG as a transport fuel is an Australian first,” he said.

“When construction is complete, this plant will supply a cleaner fuel than diesel with a more stable price. That’s a big win for trucking operators, for the environment and the local economy. LNG is a reliable and proven technology that will offer Queensland’s trucking operators an economically and environmentally appealing alternative to diesel.”