PNG Gas partners look for answers, CH4 looks for funds for Townsville power project

Fresh from signing royalty and tax agreements last week with the PNG Government last week, the proponents of the $6.8 billion PNG-Queensland pipeline will be in Brisbane this week wanting to know just why its bid to supply gas to the proposed Townsville power station failed.

In particular, they would like to know how CH4, a three year old start-up that has drilled just three wells in north Queensland, could manage to defeat a venture backed by two of the world's biggest oil companies and win the crucial Townsville gas supply contract?

ExxonMobil and Oil Search, regarded the 20 petajoule per year contract as an important plank in securing a sufficient customer base for its pipeline project.

One observer puts down the Queensland Government's decision to a "mixture of finance, politics, history and geology."

The winning Townsville bid announced last week was from Enertrade, which overcame a plan promoted by the Stanwell Corp and The Australian Gas Light Company, which would have used PNG gas, as well as a proposal from Origin Energy, also based on a coal-bed methane (CBM) plant.

CH4 director and Macquarie executive David Wrench said CH4 intends to drill more wells to prove in time by the end of the year that it can deliver sufficient gas for Townsville by the beginning of 2005.

Mr Wrench added CH4 is mulling a float on the stock exchange to raise $150 million to develop its CBM gas field in the Bowen Basin.

"Some of the funding is likely to be through debt, and the balance will be equity," Mr Wrench said.

The funds would be used to drill sufficient wells within its Grosvenor gas field to meet its obligations under the contract to deliver up to 290 petajoules of gas over 15 years from January 2002.