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Qld LNG rivals join up to control costs

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AAP

2013-07-04

The operators of two of Queensland's three giant gas projects will share resources amid worries that soaring costs are threatening a liquefied natural gas (LNG) boom.

Santos, operator of the $18.5 billion Gladstone LNG project, and British giant BG Group, which runs the $20.4 billion Queensland Curtis LNG plant, have agreed to link each other's pipelines.

Both projects will now be able to share gas through each other's pipelines if needed.

The pipelines transport coal seam gas hundreds of kilometres east to each of the company's LNG plants at Curtis Island on Queensland's coast.

Thursday's announcement follows recent criticism from global consultants McKinsey and Co, who argue that the industry needs to collaborate to control cost blow-outs and compete with other LNG suppliers.

The other Curtis Island operator, Origin Energy, is tipped to strike a similar deal with BG Group.

The success of Australia's $200 billion investment in a once-in-a-generation Asian LNG boom is considered crucial to the economy, with official forecasts predicting that it could overtake earnings from iron ore by 2020.

Under the Santos and BG Group deal, if either plant had to shut down one company could provide gas for the other, Santos' vice president of Gladstone LNG downstream, Rod Duke, said.

"The significance of this is that it shows these projects are able and willing to collaborate and work together in a way that is mutually beneficial," he told AAP.

"If you are going to pass things over the back fence from time to time you want to make sure you build a good relationship with your neighbour."

He acknowledged criticism that the large projects could have saved money by sharing costs before now, but said the projects weren't approved or developed at the same time.

The commercial arrangements of buying, selling or swapping gas still have to be nutted out, with the cost of connecting the pipelines - "in the tens of millions" - to be shared.

Mr Duke said Gladstone LNG was due to finish building its pipeline by this time next year ahead, of starting production in 2015.

Greg Roberts