The Letter of Intent with Gelita Australia Pty Ltd represents the second customer for Arrow in the Beaudesert region, 50km west of Brisbane, adding to the gas and electricity supply arrangements secured in September with manufacturer A.J. Bush.

“This contract shows that we are delivering on our promise to shareholders, to build a portfolio of market opportunities of varying scale, length and margin to complement Arrow’s larger, longer term, foundation sales contracts,” said Arrow Chief Executive Nick Davies.

Arrow said it would begin appraisal drilling in the Beaudesert region during the first quarter of this year to support field development and to meet the initial requirements of foundation customers.

“The appraisal drilling follows the discovery last year of both coal seam gas and conventional gas at Mt Lindesay-1 near Beaudesert, making it the nearest gas deposit to the Brisbane and Gold Coast markets,” Davies said.

Davies said the deal which targets gas supply from mid-2006, would provide Arrow with early gas sales revenue as the company builds its portfolio of customers in the region.

“This arrangement provides for a competitive energy price for GELITA with the additional benefit of displacing coal consumption for the cleaner fuel source of coal seam gas,” he said.

“It also provides gas sales revenue for Arrow and a field development opportunity in an area targeted for industrial growth.”