BG Group Says More Work Needed to Expand Australian LNG Project

BG Group Plc, the U.K.’s third-largest natural-gas producer, said it needs to carry out as many as three years of exploration to justify an expansion of its $20.4 billion liquefied natural gas project in Australia.

BG is considering a third LNG processing unit, or train, to add to the first two, Derek Fisher, managing director of the Australian unit, told reporters today in Brisbane. The first stage of the project in Queensland state is on track to start next year, and the budget is unchanged, he reiterated.

“We are interested in doing a third train,” he said. “However, we have some work to do to make that a reality. We probably have two to three years of exploration work ahead of us to prove up the reserves such that we can make the case.”

BG, Santos Ltd. and a ConocoPhillips-Origin Energy Ltd. venture are developing more than $60 billion of LNG ventures on Queensland’s Curtis Island to tap rising Asian demand. BG said last year the cost of its project jumped 36 percent because of gains in the Australian dollar and rising labor expenses.

The company is giving its Australian unit QGC Pty “significant sums of money” for exploration, Fisher said. The country has the largest exploration budget globally for BG, he said. An expansion of the Australian LNG project is one of four developments the company is considering worldwide, along with ventures in East Africa, Canada and the U.S., Fisher said.

“We probably underestimated the amount of work that would be required to prove up the next level of reserves,” he said.

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