Sydney, Australia – 16 January, 2009 – Eastern Star Gas Limited (ASX:ESG OTCQX:ESGLY) understands from a media report that BG Group plc (BG Group) has decided not to proceed with a gas fired power station development in the Hunter Valley. This development was proposed last year by a consortium led by Queensland Gas Company Limited (QGC), and was to use gas imported from Queensland. As a result of the recent takeover of QGC by BG, QGC is now part of the BG Group ESG understands that this media report has caused confusion regarding the status of power station projects that may use gas from ESG’s Narrabri Coal Seam Gas Project.
ESG, together with joint venture partner Gastar Exploration Ltd, confirms that its arrangements for supply of gas to new gas-fired power stations are unaffected by yesterday’s news and are proceeding to plan. Indeed, in the longer term, a decision not to import gas into the Hunter Valley from Queensland is likely to benefit ESG.
Mr John Anderson, Chairman of ESG, said “ESG is aware of and has had discussions with a number of gas-fired power station proponents, and has Memoranda of Understanding in place for supply of gas to stations proposed for development by NSW Government owned Macquarie Generation and Babcock & Brown. These projects have an inherent advantage over the QGC project since they will be using indigenous NSW gas, which is much cheaper to deliver than gas from Queensland”.
Mr Anderson added that “the State of NSW will also realise material benefits from royalties that will be paid to Government when indigenous gas is produced for power station or other uses”.
Mr David Casey, Managing Director of ESG, estimated that “NSW will in the future require of the order of 350 MW of new generating capacity to be installed each year and suggestions that gas is not the favoured fuel are misguided for two reasons”.
“First, gas-fired plant is more efficient and has considerably lower capital and operating costs than modern, super-critical coal-fired plant, which is important in the current credit-constrained world”.
“Second, gas-fired plant has well known environmental advantages over coal-fired plant when it comes to greenhouse gas emissions”.
ESG is continuing with work to increase certified 2P gas reserves to a level that will allow power station and other potential gas supply arrangements to be finalised. ESG has previously indicated that it expects to achieve a substantial increase in certified reserves and resources by the end of 2009, and remains confident that this will be the case.
ESG Price at posting:
54.0¢ Sentiment: ST Buy Disclosure: Held
