The gas contract will be sourced from AGL’s interests in Queensland’s CSG fields and will be priced based on an oil-linked formula.

AGL can continue to utilise Queensland gas during periods of high east coast demand.

The company said the transaction was consistent with AGL’s objective of selling gas from existing favourable wholesale contracts into the high value Queensland market.

The annual demand created by GLNG’s thirst is expected to see AGL sell up to 34PJ per annum until 2020, but AGL was quick to reassure customers that it has flexibility in its portfolio for future sales to its consumer market.

The agreement is the third sale of gas from AGL’s wholesale gas portfolio into the LNG projects in Queensland, and the first long term sale to the GLNG project.

AGL executive general manager energy markets Stephen Mikkelsen said the agreement stands to deliver significant value and largely mitigates any oil price exposure under the Gippsland Basin Joint Venture contract between 2018 and 2020.

GLNG downstream vice president Rod Duke said the agreement with AGL adds to GLNG’s diverse gas supply portfolio, comprising supply from GLNG’s own CSG fields, Santos portfolio gas, underground storage and third party supply.

“When combined with GLNG’s quality LNG off-take contracts with project partners Petronas and Kogas, this supply portfolio delivers significant value to the project,” Duke said.

“Since our first LNG cargo in October, ramp-up of LNG train 1 has progressed well with the train having already produced well above nameplate capacity. Six LNG cargoes have already been shipped to our customers.

“Commissioning work on GLNG’s second LNG train has commenced with a number of its subsystems now operational, and we are on track for first LNG from train 2 in the second quarter of 2016.”

Santos has a 30% interest in GLNG with Petronas (27.5%), Total (27.5%) and Kogas (15%).