NRG Flinders has agreed to buy more than 100 petajoules of gas from AGL to meet its requirements at the 180-megawatt Osborne cogeneration plant in Adelaide.

The existing gas supply contract between AGL and NRG Flinders, which runs until the end of 2010, has been extended until the end of 2018, conditional upon the PNG gas project going ahead.

AGL managing director Greg Martin said the deal reflected the important role for PNG gas in providing an alternative source of competitively priced energy.

AGL has a binding agreement to buy 1500PJ from the PNG gas project over 20 years.

Gas from the project will be integrated into AGL’s wholesale network to supply existing retail and industrial customers across eastern Australia such as NRG Flinders, as well as developments such as the 370MW Townsville power station.

“The PNG gas project will provide greater flexibility to AGL’s wholesale gas portfolio, which will ensure that AGL can continue to provide competitively priced gas to its customers as well as underwriting the development of power generation initiatives in expanding markets such as Queensland,” Martin said.

AGL is the preferred developer, together with partner Petronas Australia, to build the Australian component of the natural gas pipeline from PNG to Queensland. It is investing $A67 million into the front end engineering and design process for the Australian component of the pipeline.

Last month, it finalised the acquisition of 10% of the PNG gas project and associated oil and gas reserves from Oil Search for around $US400 million.