Under the agreement CE will purchase up to 12 megawatts of electricity to will be generated by ESG's wholly owned subsidiary, Narrabri Power Limited.

The project is a 'greenfields' resource development in regional NSW and it will represent ESG's first income producing property, moving the company from the ranks of explorer to gas producer.

Upon announcing the deal Energy and Utilities Minister Frank Sartor said the project will see twelve generators established and connected to the national grid.

"Combined, they will produce 12 MW of electricity - that's enough energy to power up to 13,000 homes each year - equivalent to a city the size of Albury. But just as important is the environmental gain that will be achieved by using gas, that will reduce greenhouse emissions by 36,000 tonnes every year," Sartor said.

The 11.3 Petajoules (PJ) of Proved and Probable (2P) gas reserves in the Coonarah Gas Field are dedicated to the power station with the Proven (1P) reserves sufficient to operate the power station at full load for the 10 year term of the PPA.

The Narrabri Power Project will include a gas gathering system to bring gas by 150mm buried steel pipeline from the Coonarah Gas Field to the power station site located 12km west of Narrabri.

Construction of the project will commence in December 2004, with power expected to be generated by June 2004.