Indian gas deal talks ignite Arrow stock price [25feb06]

SHARES in Arrow Energy jumped almost 9 per cent yesterday after the company revealed it was negotiating an investment and technology deal with Indian government-controlled energy giant GAIL India.














GAIL has previously signalled plans to spend up to $500 million in Australia to grow its business. It is investigating the potential for establishing a processing plant to export Arrow's gas to India and other markets using gas-to-liquids and compressed natural gas technology.

Arrow chief executive Nick Davies said a memorandum of understanding would be finalised over coming months leading to GAIL making a substantial investment in Arrow's operations.

"Through this agreement we will have an injection of funds and the use of GAIL engineers on secondment, allowing us to rapidly accelerate our Australian development projects," he said from India yesterday.

"It is likely that any investment by GAIL will be made across the entire value chain including investment in both exploration and future production projects."

The stock closed up 5.5¢, or 8.9 per cent, at 67¢ on turnover of 1.74 million units in response.

Mr Davies said the Bombay Stock Exchange-listed group, which reported a $US435 million ($A588 million) profit in 2005, would help Arrow find export opportunities as it ramped production through multiple projects.

"GAIL will identify export markets for gas-to-liquids or compressed natural gas, and we will be able to accelerate our sales platform beyond the current finite market of Queensland," he said.

Arrow would also assist GAIL in exploration and development of coal bed methane projects in India where there was both strong demand and high prices for gas.

"India is currently only meeting about half of its potential gas needs," he said. "Some of that is from domestic production and some is being imported as LNG from the Middle East at high cost.

"Potentially we could jointly bid for CBM exploration blocks in the upcoming round of CBM acreage releases in India."