The facility is intended to use 190 petajoules per year - more than the entire Queensland gas market - from QGC's coal seam methane tenements in the Surat Basin, currently servicing the state's domestic market.

This follows a similar announcement made last year by Santos, which is moving to build a 3-4MMtpa LNG plant at the Queensland deepwater port of Gladstone.

In addition, Arrow Energy and Sunshine Gas have each unveiled their own plans to build mini-LNG facilities, also at Gladstone.

QGC managing director Richard Cottee said the $8 billion project, involving a 380km pipeline and construction of an LNG plant, was expected to be operational for at least 20 years starting in 2013.

QGC has not specified where its plant will be built, but it is believed to be planned for construction in or near Gladstone.

He added that the transaction was "by far" the most significant milestone in his company's history.

"This project puts Queensland's gas on the world stage and transforms QGC from an explorer and producer to a fully integrated energy company with outstanding growth potential," Cottee said.

"It will make us the clear leader in Australia's coal seam gas sector."

According to Cottee, global LNG demand is forecast to more than double from 150 million tonnes per year in 2006 to 400MMtpa by 2015.

Under the alliance, BG Group will pay $250 million to buy new QGC shares equivalent to 9.9% of QGC's expanded stock.

In addition, it will pay a further $415 million in cash for 20% of QGC's interests in the Walloon CSM acreage.

QGC would receive a further $207 million cash for the sale of an additional 10% stake when a final investment decision is made on the construction of the LNG facility and certification 7000PJ of 2P gas reserves.

BG Group has also agreed to buy 100% of the planned production of the LNG plant under a 20-year contract.

In order to prove up enough reserves, QGC is planning a $230 million exploration program to increase its certified 2P reserves from 1317PJ to at least 7000PJ.

QGC has more than 7255PJ in reserves and contingent resources as assessed by independent certifiers Netherland Sewell & Associates.