In the company's quarterly report, Arrow said planning for both the upstream and downstream components of the two-train 3 million tonne per annum LNG project remained on track with all parties focused on delivering FID in the March quarter.
Early site works have begun with current activities including civil works and deep soil mixing to prepare LNG tank foundations.
The company added that the near-term focus for the partners was to revise and complete an LNG sales agreement with Toyota Tsusho in alignment with project's restructure announced earlier this year.
Under the restructure, the CSG-LNG project will be split into an optimised structure of InfraCo and TrainCo.
InfraCo will be established as an unincorporated joint venture between LNG Ltd's subsidiary Gladstone LNG (51%) and Arrow (49%) to own, design and construct the project's infrastructure, including the storage tank, jetty/ship loading and all related facilities and services.
TrainCo will be 100%-owned by Arrow and will develop the first 1.5MMtpa LNG train on land under a sublease from InfraCo.
The LNG train will include gas pre-treatment and liquefaction facilities, and will use LNG Ltd's OSMR liquefaction technology under a technology licence and fee agreement.
Arrow will source the gas for the train from its fields in the Surat Basin and, subject to final agreed terms, will retain an option to develop an additional LNG train at Fisherman's Landing.
On the exploration front, Arrow embarked on a $300 million exploration and appraisal program across the Surat, Bowen and Clarence Moreton basins during the quarter aimed at accelerating reserve growth
In the Surat, the company started drilling a five-spot vertical well pilot south of Tipton West. The pilot is targeting the Walloon seams and is designed to confirm deliverability rates in support of field development planning.
Over in the Bowen, Arrow has 24 pilot wells in the early stage of dewatering and gas production, and expects the pilots to allow for significant reserve growth in the area.
In the Clarence Moreton, the company completed a hydro-fracture pilot and is preparing to start production testing, while over in the Nagoorin Graben Basin, the company is drilling two exploration wells.
The two wells, Boyne River-5 and Boyne River-6, are being drilled in the Boyne Rive region to determine seam structure and reservoir characteristics.
The company has also started work on a field development plan for the Bowen Basin to supply gas to the proposed Shell Curtis Island LNG plant.
Meanwhile, the company reported a 2.4% increase in gross gas production during the December quarter to 9839 terajoules while gross sales were up 10%.
Production at Tipton West and Moranbah remained largely flat while production at the Daandine gas field and Kogan North field increased moderately.
At Kogan North, Arrow is planning to start a five-well pilot in the March quarter in a separate area to its existing development but within the lease where preliminary exploration has shown to be highly prospective.
The company expects production from the Moranbah project to steadily improve in 2010 as a range of water-handing improvements are carried out.
In the year to date, gross gas production was up 26.9% to 19.4 petajoules compared to the same period last year due to the major expansion of the Daandine field to supply the Braemar 2 power station.
Sales revenue for the quarter was up 54% on the previous quarter and 131% on the same time last year due to the increase in electricity sales following the commissioning of the Braemar 2 power station.
Arrows cash position at the end of the quarter was $253.4 million.
International activity
Arrow's international program in its four target Asian countries continued during the quarter, with the company now drilling in China, Indonesia, Vietnam and India.
In India, Arrow continues to progress negotiations for a 30% interest in the Ranigani and North Karanpura CSG blocks from ONGC and is confident of being awarded blocks under the government's CBM IV bidding round.
In Indonesia, Arrow is in negotiations to partner on a number of highly prospective CSG opportunities and has been invited to participate in Indonesian government forums to facilitate CSG commercialisation by 2011.
