The five year deal runs until the end of 2011 and covers the swapping of between 90 and 200PJ of gas between Queensland and the Moomba Hub in central Australia covering the period until the end of 2011. Yesterday’s announcement ratified the Heads of Agreement struck in May 2004 that set out the outline of the deal.

It is expected to save a significant amount of money in gas transport costs.

The arrangement involves Origin delivering gas from its central Queensland coal seam gas fields to the SWQ Producers at Wallumbilla in Queensland. This will then be used to supply the SWQ Producers customer requirements in south east Queensland.

In return, the SWQ Producers will supply an equal quantity of gas produced in the Cooper Basin to Origin at the Moomba Hub. Origin will use the swapped gas at the Moomba Hub to supply its customers in South Eastern Australia and particularly the NSW market.

Origin’s chief operating officer, Ms Karen Moses said “This gas swap agreement reflects the growing maturity and diversity of supply within the eastern Australian gas markets. With new discoveries and gas field developments in the Otway, Bass and Gippsland Basins in southern Australia, and the emergence of large scale production of coal seam gas in Queensland, the eastern Australian market has an abundance of gas supply options.

“Innovative agreements such as this gas swap help to remove some of the physical constraints which otherwise may have hindered the development of flexible supply options, and that may have led some to contemplate a need for additional sources of gas supply from more remote areas,” said Ms Moses.

Ms Moses said “This is the largest gas swap agreement that Origin has entered into to date, but we believe that these sorts of arrangements will become more common place. The agreement again signals Origin and the market’s confidence in coal seam gas as a flexible, reliable and cost effective means of satisfying the ongoing energy needs of customers in Queensland, NSW and SA.”

The SWQ Producers comprise – Santos group of companies (60.0625%), Delhi Petroleum (23.2%) and Origin Energy Resources (16.7375%).