BHP exits coal bed methane industry - Breaking News - Business - Breaking News

Global miner BHP Billiton has exited the coal bed methane (CBM) industry in Australia with The Australian Gas Light Company (AGL) picking up its assets for $US68.7 million ($A93.25 million).
AGL has bought up a 50 per cent stake in the Moranbah gas project in Queensland, saying the deal strengthened its position in the state's energy market.
Moranbah is a joint venture with CH4 Gas Ltd and is forecast to produce about 16 petajoules of gas in 2006 - representing 12 per cent of the Queensland gas market.
AGL managing director Paul Anthony said the operation would complement the company's stake in the proposed $4 billion Papua New Guinea gas project and the associated PNG to Queensland gas pipeline.
"This is a strategic acquisition for AGL providing a strong presence in one of the fastest growing energy markets in Australia," Mr Anthony said.
"This project firmly positions AGL to capitalise on the significant growth opportunities offered by the Queensland market, particularly in the Townsville-Gladstone corridor."
AGL said Moranbah could supply the Townsville or Gladstone markets ahead of first gas from the PNG project, expected in 2009.
AGL last year agreed to buy around 1,500 petajoules of gas from the PNG project from 2009 in a $4.5 billion deal.
The Moranbah purchase price, which will be funded from existing debt facilities, equates to 49 cents per gigajoule which AGL said compared favourably to recent CBM transactions.
The deal will not be earnings per share positive for AGL until the fifth year of AGL's ownership, but would be operating cash flow positive from the time of the deal.
These financial forecasts will be re-estimated if a proposed merger with West Australian utility Alinta is approved later in the year.
Mr Anthony said the Moranbah project was consistent with AGL's diversification strategy with the company now sourcing energy from South Australia, Victoria and other CBM projects in Queensland.
"It underpins AGL's entry into the Queensland market particularly when retail gas and electricity markets become contestable post 2007," Mr Anthony said.
If current reserves of 376 petajoules were grown, AGL said there was the possibility of supplying additional gas contracts in the Townsville/Gladstone region.
AGL has forecast it will need to spend a total of between $44 million and $64 million in the first four years in development costs.
© 2006 AAP