Located close to the NSW-Queensland electricity interconnet, Chinchilla would become Australia’s first power station to be built at a gas source. This means it would also be one of the country’s lowest-cost electricity producers, according to QGC.

With project feasibility now established, initial power generation is proposed for 2008/09, QGC said.

Under the agreement, EIT would fund the completion of design, commercial agreements and finance.

EIT would own the project, with QGC supplying the gas from Berwyndale, QGC managing director Richard Cottee said.

”EIT’s decision is an important step towards the major expansion and diversification of markets for QGC’s coal seam gas,” Cottee said.

“Developing electricity generating plants at the source of QGC’s coal seam gas reserves, and supplying the national electricity grid, is a key plank in our growth strategy.”

Cottee said supplying gas directly to an on-site power station was a cheaper option, as it eliminates the need for a pipeline, dehumidification and high- pressure compression of the gas.

He added that due to demand growth, the power station was now a 200MW facility – almost four times the original planned generating capacity.

“At 200 MW, the power station will almost double QGC gas sales either under contract or through power generation from 15.4 PJ to approximately 30 PJ per annum,” Cottee said.

“It will add considerably to QGC’s capacity as a supplier to the national electricity grid.”

The Berwyndale South project is due to start delivering gas in April to CS Energy and the Braemar Power Station.

The company’s Argyle Field, in which Origin this week acquired a 40.625% interest, is due to begin production to supply Incitec Pivot in September 2007.

QGC said it welcomed Origin's entry to the Argyle project.

“QGC recognises the synergies the Argyle gasfield offers to Origin, which owns and operates the adjacent Talinga Project,” QGC managing director Richard Cottee said.

“The acquisition by Origin confirms our view of the high potential and value of the Argyle Project. As the Argyle Project operator and the majority owner of the Argyle tenements, QGC looks forward to working with Origin as we move towards production."

Last month, QGC made an off-market takeover bid for troubled CBM company Sydney Gas. This acquisition, currently being review by the Sydney Gas board, would combine the coalbed methane gas reserves of the Sydney Basin with QGC’s existing Surat Basin projects.