The coal seam methane giant told the market today that the $9.1 million investment was an "excellent fit" with Arrow's high margin strategy.

Chief executive Nick Davies said it would allow Arrow to pursue a broader range of resource opportunities across Asia without being constrained solely to local markets to develop its CSM to LNG strategy.

"We believe that the proposed Arrow-LNG Ltd Gladstone LNG project will represent a major milestone in the global LNG business by proving that smaller gas accumulations can be developed as LNG projects," Arrow chief executive Nick Davies said.

"This will bring previously stranded gas accumulations into the realms of commercially viable LNG projects and could be particularly enhancing for typical sized CSG accumulations and hence for our future business."

Under the terms of the deal, Arrow has agreed to pay $9.1 million for 14 million LNG Ltd shares at 65c each, with a right to participate in future equity issues on a 'no dilute' basis.

The agreement also gives Arrow the option to bring in LNG Ltd to design fit-for-purpose LNG facilities for any CSM accumulations in Australia and Asia, which Arrow deems appropriate for development.

Arrow would then have an option to take a 50% interest in any LNG plants subsequently developed.

In addition, Arrow also has an option to take a 20% interest in the proposed Gladstone LNG terminal at 'ground floor' terms, rather than the previous 'promote' terms.

Arrow will also join LNG Ltd in the marketing of LNG from the Gladstone facility and will be given expanded and full aggregation rights for any gas supply to the plant.

Lastly, Arrow will appoint Davies as a director on LNG Ltd's board. The company said Davies has extensive experience in the international LNG arena, particularly in his previous role as president of BP's Asian gas and power business.