Herbert Smith Advises CNOOC on QCLNG Deal, Australia

Herbert Smith Freehills has recently advised China National Offshore Oil Corporation (CNOOC) on its entry into a Heads of Agreement (HOA) with BG Group for the acquisition of major interests in the Queensland Curtis LNG (QCLNG) project in Australia for $1.93 billion and the sale of liquefied natural gas (LNG) from BG Group’s global LNG portfolio.

Fully-termed transaction agreements are expected to be executed in the first half of 2013, and upon closing, CNOOC will reimburse BG Group for its share of QCLNG project capital expenditures incurred from 1 January 2012.

The HOA agreement involves the purchase of an additional 40%interest in the first production train of the QCLNG project, increasing CNOOC’s ownership of the facility from 10% to 50%, as well as other acquisition of equity interest in a number of upstream tenements. The legacy Herbert Smith and Freehills advised on the original transaction where CNOOC acquired a 5% interest in the upstream and a 10% interest in the midstream of the QCLNG project.

Under the LNG sale agreement, CNOOC will receive 5 million tonnes per annum (mtpa) of LNG from BG Group for 20 years beginning in 2015, sourced from the BG Group’s global LNG portfolio.

In addition to the 3.6 mtpa LNG sale agreement signed between the two energy conglomerates in 2010, on which the legacy Herbert Smith advised, BG Group will supply a total sum of 8.6 mtpa of LNG over a 20-year period to CNOOC.

The Herbert Smith Freehills China team was led by Hong Kong based partner Hilary Lau, who was supported by senior associate Phoebe Yuen and associate Jie Li. The Herbert Smith Freehills Australia team was led by Stuart Barrymore, who was supported by associate Sue Nicholas.

Hilary Lau commented: “We are delighted to have had the opportunity to work with CNOOC again on this landmark LNG transaction which was a significant milestone for CNOOC in expanding its business in the LNG sector. We have a strong relationship with CNOOC and we look forward to building further on this as they continue with their international growth.”

Stuart Barrymore commented: “The expertise of our energy team was crucial in getting this deal done as it spanned the entire LNG value chain. The cooperation between our China and Australia teams provided tangible benefits to CNOOC with complex issues affecting multiple components of the transaction being digested and responded to in rapid time.”

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LNG World News Staff, November 12, 2012; Image: QGC