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From Minebox today:

Arrow gas for export market in multi-billion dollar LNG export deal


Arrow Energy will supply gas to a new liquefied natural gas export facility planned for Queensland’s Port of Gladstone in a multi-billion dollar deal that has the potential to more than double Arrow’s forecast production and provides leverage to soaring oil prices.

Under a Heads of Agreement signed with LNG International, supported by the world’s largest independent owner of LNG transportation, Golar LNG Limited and a high investment grade Japanese LNG buyer, Arrow proposes to supply 55 petajoules of gas per year for a 12-year period from late-2010, with an option for another 55PJ per annum from as early as mid-2011, subject to a second LNG train being developed.

The first stage of the facility is designed to produce around one million tonnes per annum of LNG, with an option to expand to two million tonnes.

Arrow’s gas will be supplied at a base price with an upside linked to oil prices, providing the company with significantly higher prices than gas priced for electricity generation.

Arrow Chief Executive, Nick Davies said this agreement is the breakthrough the company has been looking for and planning towards over the past 15 months.

“Our strategy has been to seek a viable export project for our coal seam gas from the east coast of Australia that would give us exposure to oil pricing and help us to break out of the low gas price environment in the eastern states caused by the wide availability of coal,” he said.

Mr Davies said Arrow is currently drawing up 2008 financial year exploration and appraisal programs targeting net 2P (proved and probable) reserves of 1,500PJ, with a target for gross un-contracted reserves that could access the Port of Gladstone, of around 1,100PJ during the year.

“That reserve level would be more than adequate to meet the needs of the first LNG train, with any additional reserves required for the second LNG train to be added in 2009 financial year,” he said. “The significant field development that will follow on immediately from this reserve certification program is also being assessed for implementation in the FY2009 and FY2010 years.”

“This LNG export agreement shows our ability to execute on our strategy and we anticipate significant growth in shareholder value as we move towards our goal of becoming the Asia-Pacific region’s leading independent CSG producer,” Mr Davies said.