In a statement today, the diversified energy major said it would acquire a 35% stake in CSM Energy, which has deals with several coal mine operators to pursue CMM gas extraction and commercialisation opportunities in Queensland and also has identified potential projects in New South Wales.

As part of the deal, AGL has secured rights to access any gas production and power generated from future CMM projects.

It also has the further option to acquire a minimum 35% direct equity stake in all projects pursued by CSM Energy.

One of CSM Energy’s project areas is adjacent to the Moranbah Gas Project, where AGL acquired a 50% stake last year.

AGL said CMM, traditionally a waste product for coal miners, is potentially a major natural gas resource within mining leases.

Tighter environmental development conditions are leading to numerous opportunities to provide gas extraction services to the coal mine sector, according to AGL. This could lead to power generation projects and/or wholesale gas sales deals.

AGL managing director Paul Anthony said the deal would let his company secure further access to equity gas positions in eastern Australia.

“This is a modest but exciting entry for AGL into an industry which is showing rapid signs of growth in response to the environmental and development pressures on Australia’s burgeoning coal industry,” he said.

AGL said it would fund the acquisition through existing cash reserves and expects to complete the transaction before the end of June.