BG Group on Monday signed a sales agreement with Tokyo Gas Co., Ltd. concluding negotiations announced in March 2010 for the supply of 1.2 million tonnes of Liquefied Natural Gas (LNG) a year for 20 years from 2015.

Under the agreement, Tokyo Gas will be supplied with LNG from the Queensland Curtis LNG ("QCLNG") facility on Curtis Island, near Gladstone in Queensland, Australia, and from the Group's global LNG portfolio.

The QCLNG facility is being developed by BG Group's wholly owned Australian subsidiary, QGC Pty Limited ("QGC"), to liquefy and export coal seam gas from QGC's extensive acreage in the Surat Basin. BG Group sanctioned QCLNG on 31 October 2010 and the plant is planned to come onstream by 2014.

The agreement is the first fully termed sales agreement for supply to Japan of LNG sourced from coal seam gas. Japan is the world's largest importer of LNG.

The LNG sales agreement, along with related agreements referred to below, were signed today in Brisbane, Queensland, by Tokyo Gas President Tsuyoshi Okamoto; BG Group Executive Director, Executive Vice President and Managing Director, Americas and Global LNG, Martin Houston; and BG Group Executive Vice President and Managing Director, Australia, Catherine Tanna.

In addition to the LNG sale, under the terms of the related agreements executed Monday:

• Tokyo Gas will acquire a 1.25% equity interest in the reserves and resources of certain BG Group tenements in the Walloons Fairway of the Surat Basin in Queensland. Tokyo Gas will reimburse BG Group for 1.25% of costs incurred in respect of the tenements; and
• Tokyo Gas will become a 2.5% equity investor in QCLNG Train 2, the second of two liquefaction trains which will form the first phase of the QGC-operated QCLNG development. Tokyo Gas will reimburse BG Group for 2.5% of costs incurred in respect of Train 2.

BG Group Chief Executive Frank Chapman said: "Tokyo Gas is now an important foundation customer for our ground-breaking Queensland Curtis LNG Project. With these agreements we will bring a new source of natural gas to Japan—the largest LNG market—and advance the long and rewarding relationship between our companies."

QCLNG is underpinned by BG Group global LNG sales agreements for almost 10 million tonnes a year comprising: the agreement with Tokyo Gas announced today; a 20-year, 3.6 million tonnes a year agreement with the China National Offshore Oil Corporation; a 21-year, 1.7 million tonnes a year agreement to GNL Chile; and a 20-year agreement to supply up to 3 million tonnes a year to customers in Singapore.

BG Group plc (LSE: BG.L) is a world leader in natural gas, with a strategy focused on connecting competitively priced resources to specific, high-value markets. Active in more than 25 countries on five continents, BG Group has a broad portfolio of exploration and production, Liquefied Natural Gas (LNG) and transmission and distribution business interests.

Tokyo Gas is Japan's largest city gas supplier, with 10.63 million customers. Its service area encompasses the Tokyo metropolitan area and the surrounding Kanto region, a market with huge demand and high growth potential. As a city gas supplier, it does more than just deliver gas to customers. Its operations extend from participation in upstream LNG projects to transport by LNG tanker, conversion to gas at LNG terminals, gas supply through pipelines, sales of gas appliances, and safety at customer sites. Its establishment of an LNG value chain from upstream businesses to downstream businesses sets it apart from other gas suppliers around the world.

QGC Pty Limited ("QGC" - ACN: 089 642 553) is a leading Australian coal seam gas explorer and producer focused on supplying gas to domestic and international markets. A BG Group business, QGC is establishing one of Australia's largest capital infrastructure projects to turn Queensland's world-class coal seam gas reserves into Liquefied Natural Gas (LNG). Queensland Curtis LNG (QCLNG) is a priority project for QGC which involves expanding exploration and development in southern and central Queensland and transporting gas through an underground pipeline network to Curtis Island near Gladstone, where it will be liquefied.

Natural gas in coals (coal seam gas or CSG) occurs when the coal is formed deep underground by a process of heating and compressing plant matter. The gas is trapped in coal seams (typically 300-600 meters underground) by water pressure and is extracted via wells drilled through the coal seams. The water is pumped out, and the natural gas is released from the coal. The gas is then processed to remove water and piped to compression plants for injection into gas transmission pipelines. Coal seam gas in the Surat Basin of Queensland typically contains more than 98% methane, with very small amounts of nitrogen and carbon dioxide.