gold coast bulletin report

ICON Energy finally sealed its $30 billion gas deal with China yesterday, but it now has to convince the share market it has a valuable asset in its hands.

The Gold Coast-based company said it was set for an intense round of negotiations with third parties to establish a ''gas bank'' capable of supplying Shantou Sinogas Energy with 40 million tonnes of LNG over 20 years.

It was also poised to kickstart a major drilling program to establish commercial reserves within its own suite of exploration permits, including ATP 855 which is now subject to a legal stoush with Beach Energy.

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But news of the gas agreement, a full year after Icon signed a memorandum of understanding with the Chinese, failed to fire the company's share price yesterday.

After hitting a high of 33c, the shares ended 1.5c lower at 26.5c after a day-long trading halt.

More than 18.8 million shares changed hands following the highly anticipated announcement.

Under the agreement, Icon will start supplying gas to China by June 2016 at the latest and it is free to source the gas from its own reserves, third parties and joint-venture partners.

The ultimate value of the contract to Icon's bottom line remains unclear, although company secretary Wesley Glanville conceded Icon needed to explain its strategy more robustly to investors.

''Clearly we wouldn't be doing this unless we could make some money,'' the former Santos executive said.

''The critical thing is the agreement with Shantou Sinogas Energy is a valuable asset for the company as there is enormous flexibility in how we supply that LNG.''


Mr Glanville said Icon was confident of securing gas from its own reserves, particularly ATP 855 which he said was ''highly prospective''.

Beach Energy, which has undertaken a successful drilling program just 5km from the boundary of the permit, is taking Icon to court claiming the Coast company reneged on a farm-in deal that could have seen it earn up to 40 per cent of the permit.

Mr Glanville also said there also was an ''enormous amount of stranded gas around Australia''.

This is gas that either doesn't have a market or has distribution issues.

Mr Glanville declined to name companies targeted by Icon, but he said talks were in train to secure the gas required for the China deal ''as quickly as possible''.

''Our operational focus is to find what we can organically, but now that we have secured what is a valuable commercial asset our focus is on building that gas bank.''

Icon Energy's managing director Ray James was in China yesterday to sign the agreement with Shantou Sinogas Energy.

In a statement to the stock exchange, Mr James said Icon negotiations with third parties would take place over the next two months to establish a foundation of gas reserves to fulfil the contract.

''This is an exciting growth project for Icon Energy and comes at a time when the company is just about to launch the most vigorous drilling program in the company's history.''

Icon plans to start drilling at ATP 626 in the Surat Basin in two weeks, followed by ATP 855 in June or July.

China's state-owned China Guodian Corporation has entered the joint venture with Shantou SinoEnergy which will construct a $727 million LNG receiving terminal with capacity of receiving up to 3 million metric tonnes of gas a year.

The gas will supply customers in Shantou City area, while China Guodian has targeted some of the supplies for a number of new gas-fired power stations in the region.