Race to beat PNG pipeline


COAL seam gas group the Queensland Gas Company is out to challenge the Papua New Guinea gas project for a major share of Queensland and NSW markets after announcing an almost $60 million share issue to speed development of its Surat Basin gas fields.QGC intends to plough the money into accelerated development and exploration that it hopes will double its gas reserves within a year, with the aim of tying up more major customers ahead of any gas flowing from the proposed PNG pipeline.
QGC's ever-enthusiastic chief executive, Richard Cottee, said yesterday he believed QGC could provide cheaper gas than PNG, in part due to the rising costs of building such pipelines.
And he said the region in which QGC was developing its gas production facilities – the Undulla Nose geological structure – could prove to be a world-class gas resource.
This raised the possibility that QGC might be able to poach the PNG project's potential customers if that project is delayed, with Mr Cottee saying that "within 12 months", QGC's strategy should be able to confirm "enough reserves to meet eastern Australia's gas needs for many years from a very low cost base".
"This in turn (should create) the opportunity for QGC to underwrite new infrastructure to create new markets or seize market opportunities from other producers who may not or cannot supply", he said.
QGC will raise the $59.7 million through a one-for-four renounceable rights issue at 63¢ a share, a move welcomed by the sharemarket yesterday, which marked the group's stock 3¢ higher to 80¢.
It will sink the money into development of its successful Berwyndale South gas field, accelerated development of the nearby Argyle field and into exploration in adjacent areas. The aim is to double its proven and probable reserves to 1000PJ.
Mr Cottee said accelerated development of the Undulla Nose should place QGC in a strong position to cater to growing demand for natural gas in southeast Queensland and NSW.
"Currently major industrial electricity generation and domestic expansion opportunities are available if QGC accelerates the development of our highly successful gas fields," he said.
"The move to speed up growth would allow QGC to grasp these opportunities and bring forward increased revenues and returns to shareholders", he said.
The rights issue is fully underwritten by ABN Amro Morgans Corporate and Wilson HTM Corporate Finance, with QGC's major shareholders subunderwriting more than half of it.
"If our program of accelerated growth strategy works, we will have, within three hours of Brisbane, 2P (proved and probable) reserves equal to or better than the remaining Cooper Basin, all within a 25km radius of Berwyndale South, of which QGC's share will be 1000PJ."
QGC holds 90 per cent of Berwyndale South with Sentiant Gas Australia holding the balance. The Cooper Basin, operated by Santos, is one of Australia's biggest gas fields straddling the borders of South Australia and south-west Queensland.
QGC is aiming to at least double gas sales from a a projected 29PJ to between 60PJ and 70PJ, as the cost of coal and other energy prompts utilities to search for cheaper fuel.
The accelerated drilling project "should place QGC in a position within 12 months to provide for the significant potential increase in demand for natural gas in south-east Queensland and New South Wales," Mr Cottee said.
QGC currently has certified reserves of over 2.4 trillion cubic feet, with 147 pj in proved reserves and over 400 in proven and probable reserves.
Mr Cottee said QGC's "target finding cost of new reserves is only 3¢ a gigajoule compared with the acquisition costs of gas reserves in recent trade sales of over 60¢ in the same acreage."