In Townsville to mark the commissioning of the $190 million coal-bed methane-fuelled Yabulu power station, Beattie backed a feasability study into a $350 million gas-fired power station on the city's southern outskirts.

Beattie said state government-owned power corporation Enertrade was currently investigating building a power plant adjacent to the Sun Metals zinc refinery, according to a Townsville Bulletin report.

He said no decision had been taken to proceed and a lot of work remained to be done.

"We are talking a long way down the track but that valuable work is important for the future," Beattie said.

Enertrade is investigating a stand-alone combined cycle gas turbine station capable of generating 350-400 megawatts. It wants the plant to be in commercial service by mid-2008.

The newly commissioned Yabulu combined cycle plant is fuelled by CBM gas produced by CH4 and piped to Townsville from the Bowen Basin coalseam gas.

The 220 megawatt plant uses waste heat from the gas turbine to help drive a steam turbine, boosting its efficiency. It also recycles water used in the cooling process to the Yabulu nickel refinery.

Meanwhile CH4 managing director Lou Rozman has said the company could start delivering natural gas from north Queensland's Bowen Basin to Gladstone within a few years, according to an ABC News Online report.

CH4, a coal-bed methane (CBM) explorer and producer with acreage in central Queensland, has started its first contract, supplying Townsville's Yabulu power station with CBM from Moranbah.

Rozman said the success of the pipeline has sparked interest from other markets, but it could be several years before they come onstream as the company's focus would be on supplying where there was existing infrastructure, according to an ABC News Online report.

"The potential in Townsville and north Queensland is still very strong," he said.

"With the pipeline that's there there's still a lot of additional capacity and so we still look to Townsville and north Queensland as our primary strategic focus."