Oil and gas company BG Group has secured a $1.8bn loan from US Export-Import Bank that will be used to purchase the services of American companies for the construction of a major LNG project in Queensland, Australia.
The Queensland Curtis LNG project, which will ship gas to Asia starting in 2014, saw a dramatic increase in its cost in May to $20.4bn, from $15 bn previously. Several other LNG projects in Australia, including ones operated by Santos Ltd and Chevron Corp have suffered in a similar way due to rising labor and raw material costs and the strength of the country’s currency.
The US loan, combined with a new $3bn syndicated borrowing facility agreed last month, will underpin delivery of Curtis LNG and other key projects, BG Group said in a statement.
The Curtis project will produce 8.5m tonnes of LNG a year, using natural gas extracted from Queensland’s vast coal seams. BG Group already has long-term supply agreements with buyers in China and Japan for the gas, with first deliveries starting in 2014.
The US Export-Import Bank aims to boost exports by providing credit to buyers of goods and services from American companies. Some industry experts say Curtis and other Australian LNG projects may actually find themselves competing in Asia with LNG shipments from the U.S. in the second half of this decade, as the supply surplus created by the North American shale gas boom finds its way onto international markets.
BG is entering one of the most challenging periods in its history, as it attempts to deliver major oil and gas projects in Brazil and Australia, while also making the transition to a new management team. Current Chief Executive Frank Chapman, who over 12 years built BG Group from a largely UK-focused gas supplier to a major international energy company, will retire next month to be replaced by Chris Finlayson, the company’s head of exploration strategy and technology.