Yesterday Arrow announced a new power purchase agreement with New South Wales government-owned utility Country Energy would underwrite the development of the company’s first gas-fired power station, a 27.4MW plant near Dalby in south-east Queensland.
Then this morning, the company reported a farm-out to Beach Petroleum that would complete funding for stage one of the Tipton West scheme.
Arrow chief executive Nick Davies said the 10-year power purchase agreement meant Arrow could now finalise the financing of the Daandine power plant, to be located south of the Kogan North project.
The plant will be fuelled by 2.2 petajoules per annum of coalbed methane from Arrow’s Daandine field and will be co-located with the Kogan North project’s gas processing facilities on land owned by Arrow.
Davies said financial closure for the A$34 million power station and gas field development was expected by October, and first electricity was expected to be sold into the National Electricity Market grid by August next year.
“The Daandine gas-fired electricity generation project is a key part of Arrow’s strategy of creating our own markets, both to supplement large foundation gas sales and to provide early cash flow from future discoveries,” he said.
“By being involved in both gas production and electricity generation, we become an integrated energy producer, which ultimately means Arrow has developed an option to supply its energy to the market by wire as well as by pipeline.
“Importantly, the generation project can be replicated throughout Queensland and NSW where Arrow holds coal seam gas tenements.”
Davies said the completion of the power purchase agreement with Country Energy was the third sales contract finalised by Arrow, bringing total operated gas sales to 19.5PJ a year, with another 21.3PJ per annum waiting to be converted from memoranda of understanding agreements.
Meanwhile, oil and natural gas producer Beach Petroleum has agreed to provide A$35 million in development funding for the Tipton West CBM project in return for 40% upstream equity in PL198 and the Dalby Block in ATP 683P.
Beach also has an option to farm-in to the Dalby South and Millmerran Blocks in ATP 683P and ATP 689P by spending A$7 million to earn a 40% stake. Arrow will retain 60% of the joint venture and continue as operator.
Davies said the farm-in gave Arrow access to the expertise of a major oil producer, as well as the strength of Beach Petroleum’s balance sheet.
“Beach Petroleum had been looking for a gas investment and has moved very quickly to secure a position in our Tipton West project, which is one of the largest on-shore gas fields in Australia with in excess of 2 trillion cubic feet of possible reserves,” Davies said.
“We regard Beach’s interest in Tipton as a vote of confidence in our project and its huge gas potential.”
Davies said the farm-in agreement provided the capital requirements to develop a large resource project and meant Arrow investors would receive the benefits of early cash flow from the projects without a dilution of corporate equity.
The farm-in completes the funding for the upstream portion of Tipton West Stage 1, with negotiations well advanced for the funding of the gas compression facilities and lateral pipelines, according to Arrow.
Tipton West Stage 1 is on track for financial close in November 2005, with first gas sales planned 12 months later. Arrow recently signed a gas sales agreement with Braemer Power Project for up to 13.3PJ of gas per annum, underpinning the development of the project.
