BG Confirms CNOOC Intends to Preempt Indonesia Gas Sale

BG Group confirmed reports that CNOOC, intends to preempt the U.K. gas company's sale of its stake in a major Indonesian natural gas project to Mitsui & Co.

Last month, BG said it had agreed to sell its 50% stake in the Muturi Production Sharing Contract to Japan's Mitsui for $236 million in cash. However, the contract was conditional on the three existing stakeholders, including CNOOC and LNG Japan Corp., giving up their preferential rights to purchase the stake.

LNG Japan - a joint venture between Sumitomo Corp. and Nissho Iwai Corp. - Monday said it hopes to buy part or all of a 50% share that BG Group is selling in the Muturi block. BG's 50% stake includes a 10.73% interest in the BP PLC-led, $3 billion Tangguh liquefied natural gas project.

No one from CNOOC was immediately available to comment on the preemption and BG was unable say how big a stake either CNOOC or LNG Japan were aiming for.

The Tangguh project is expected to begin commercial production in 2007. Output is expected to be 10 million tons of LNG a year.

A spokeswoman for BG, Petrina Fahey, said BP decided against preempting the Mitsui sale.

Fahey also said that CNOOC's and LNG Japan's choice to block the Mitsui sale wasn't expected to impact its sale, as the two companies are required to purchase their stakes on the same terms as agreed with Mitsui.