Gas-sharing deal to help supply, profit

Santos and British Gas will join forces in Queensland and share gas, amid fears that soaring costs are threatening the country's liquefied natural gas boom.

Santos and British Gas will join forces in Queensland and share gas, amid fears that soaring costs are threatening the country's liquefied natural gas boom.

Santos operates the $18.5 billion Gladstone LNG project, while BG Group operates the rival $20.4 billion Queensland Curtis LNG plant.

In the first tangible sign of co-operation between consortiums building gas export projects in Queensland, the companies have agreed to link pipelines and share gas if needed.

The pipelines transport coal seam gas hundreds of kilometres east to each of the company's LNG plants.

All of the developers of new export gas projects are seeking to work co-operatively to rein in rising costs, which are undermining profitability.

The pipelines connecting the two projects with their gas supplies will be linked so that gas can be diverted between the two plants.

This will be especially useful when processing plants are shut down for maintenance or experience technical problems forcing a closure for a time.

There has been speculation Origin Energy is discussing a similar arrangement with British Gas, although this could not be confirmed.

"The interconnect points will enable gas to flow from one project to the other when necessary, for example to allow for LNG plant downtime and planned maintenance to occur without interrupting either project's gas field operations," said Rod Duke, Santos vice-president of the downstream portion of its project.

"Having two interconnects provides additional flexibility .. It gives more options to the plant operators for moving gas.

"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."

If the talks between Origin and British Gas progress, this will link all three of Queensland's export projects, making Gladstone more of a hub, industry sources said.

The pipelines will be linked at The Narrows Crossing, near Mount Larcom in central Queensland, and on Curtis Island, where the processing plants are located.

"We expect that this will be just one of many mutually beneficial arrangements across the industry in the future," Mr Duke said.

Construction of the two interconnect points on adjoining easements is expected to be completed in 2014.

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