The junior explorer today said the goal of the farm-in was to prove 540 petajoules of 2P gas reserves from the PEL 16 field near Casino to supply 18PJ per year to CS Energy.

Metgasco says this represents a gas sale value of more than $1 billion over the proposed 20-year term.

The two companies are expected to finalise a gas sale agreement over the next six months.

The company said it would also build and own a new gas pipeline between NSW and Queensland to supply gas to the Swanbank power station in Queensland.

Under the farm-in, CS Energy will spend $11 million in two stages to earn an initial 15% interest in the CSM rights to three graticular blocks in PEL 16, wholly-owned by Metgasco.

The first stage will entail drilling ten exploration wells in the farm-in area and the second will involve conducting a pilot appraisal program on a number of coal seams.

Once the reserves are established, CS Energy will invest a further $94.5m to earn an additional 35% interest by funding development of the field to supply 18PJ of gas per annum to Queensland.

“The investment by CS Energy will double the exploration expenditure spent on our field to date and will dramatically fast-track the commercialisation of our Casino operations by underwriting both the development of our gas reserves and the construction of key gas transportation infrastructure," Metgasco managing director David Johnson said.

Metgasco said this commitment would fast track the development of a major new source of gas supply for both Queensland and NSW.

The company plans to increase its 2P reserves to 660 PJ over the next 15 months.