He said he expected future margins from selling gas into the electricity market to be tight, due to an oversupply of electricity and relatively low domestic coal prices.
“We are going to concentrate on higher margins, in particular, we are going to look at different products from gas,” Davies said in an interview with investorTV.com.au.
“Those products could be anything from compressed natural gas, small-scale LNG, gas-to-liquids or environmentally advantaged power generation using environmental credits.”
A consortium comprising Arrow, India state-owned gas utility GAIL, India’s largest private sector power utility Tata Power and the Energy Infrastructure Group of Sweden, has bid for seven Indian CSM blocks. In the next fortnight, Arrow expects the results of the bidding to be revealed.
If successful, Arrow was also considering a possible dual listing on a foreign stock exchange to fund these overseas activities, Davies said.
“With that consortium … indications are good that we will get at least a couple of those blocks,” he said.
“We think that a partial IPO, in which Arrow would retain a majority shareholding, would allow us to pull in some funds and allow us to do the exploration, appraisal and potentially development of those fields.”
Davies said the merger of Arrow and CH4 had created a substantial and experienced company with a market capitalisation of about $250 million.
“We have a collection of people with experience deep in the coal seam gas industry, in particular we have three people who have served as chief executives of coal seam gas companies, within the management and board of the new company,” he said.
“In addition we have three people who are founder members of Arrow and CH4, so they have many years experience in the coal seam gas industry themselves.”
He said the merged entity was expected to supply 15% of Queensland’s gas needs this year, increasing to 25% next year, from its two producing projects. The Moranbah Gas Project is one of the largest CSM projects in Australia, while the Kogan North Gas Project, which is still ramping up, will also be a significant contributor.
Davies added that Arrow also wants to fast-track 12-15 other appraisal projects, to bring its output to 50 petajoules per annum by 2009.
