QGC brings in partner to expand Chinchilla project

QUEENSLAND Gas Company (QGC) is fast-tracking and expanding its gas supply and planning arrangements for the proposed Chinchilla power station project by raising up to $9.35 million, including funding from a new strategic shareholder.
QGC brings in partner to expand Chinchilla project QGC brings in partner to expand Chinchilla project QGC brings in partner to expand Chinchilla project QGC brings in partner to expand Chinchilla project QGC brings in partner to expand Chinchilla project

QGC this week announced funding and equity participation by international resources investment group Sentient Global Resource Fund (Sentient), an international group linked to Australian investment fund Babcock & Brown.

Sentient’s initial investment will be $4.75 million, but the fund may also take equity in the Chinchilla power station, a facility to be located in south-west Queensland and powered by gas from QGC’s coal bed methane (CBM) fields.

Sentient will buy six million QGC shares at 25 cents a share – a total of $1.5 million. It will also pay $750,000 to buy a 10% joint venture interest in two exploration permits (ATP’s 610P and 648P) adjoining QGC’s Berwyndale South and Argyle blocks. It will also provide the first $2.5 million upfront of the joint venture costs in these permits.

In addition existing investors are also being invited to purchase shares at a discount price of 25¢, to bring total new funds to $9.35 million. While most shareholders are limited to $5000 worth of stock, QGC's top holder, Elph Pty Ltd, and another "sophisticated" investor would take about $2.1 million, according to QGC managing director Richard Cottee.

The new fund raisings would provide up to $9.35 million to accelerate expansion of the certification of gas reserves, and the development of the gas supply arrangements, for the proposed power station at Chinchilla and the Incitec Pivot Gas Supply Agreement, Cottee said.

Currently QGC and its joint venturers hold a contract to supply Incitec Pivot Limited with 74 PJ of gas over 10 years (initially 7.4 PJ a year) beginning in 2007. The Chinchilla power station could be expected to use a further 100 PJ over 20 years (initially 4 PJ a year).

QGC said the proposed Chinchilla power station would be the first purely merchant power station in Australia to be located at the source of the gas.

“It will be one of the country’s lowest-cost producers of electricity,” Cottee said.

“Its location on the gas field will have major cost advantages by removing the need to pressurise and dry the gas, meet transportation tariffs, and subsequently depressurise and re-humidify the gas for use. Added efficiency will be gained through access to underground water for cooling from the gas recovery process.”

Cottee said while the pre-feasibility study for the Chinchilla power station concentrated on a 57MW power station, the facility could be expanded to several times that size as gas reserves were increased.”

QGC currently has certified combined proved, probable and possible (3P) gas reserves of approximately 550 PJ at Argyle and Berwyndale South (QGC’s share 285 PJ) equivalent to 533 bcf of gas.