The move is the first to be executed by Beach resulting from its decision, some 12 months ago, to expand its exploration activities outside of Australia and New Zealand.

Beach told the market today it has agreed to contribute $3 million towards a seismic survey in the four “highly prospective” gas-bearing tenements, located in the Ebro Basin between Barcelona and Madrid.

In return, the Adelaide-based major will earn a 25% stake in the blocks, with the remainder to be held by international player Serica Energy.

Three large targets - Torres, Fabregas and Casillas - have been identified for further seismic prior to drilling.

Beach estimates the largest of these could contain between 0.5 to 1 trillion cubic feet of recoverable gas.

A major gas trunkline passes through the tenements and connects the region to Barcelona and other major centres.

Beach managing director Reg Nelson said Spain had emerged as one of the world’s fastest growing gas markets, with improved seismic technology providing better images of the subsurface.

“High gas prices - above $US8 per gigajoule - and very strong demand in the European market provide a powerful commercial incentive to explore for gas in this region,” he said.

“Analysts believe that natural gas demand will rise significantly over the next 15 to 20 years in Western Europe.”

Nelson said Beach was aiming to become more active outside of its traditional areas of interest.

“This new initiative is part of building a high impact exploration portfolio for Beach to match its now very strong production assets and to provide future growth,” he said.

“We believe that Australian domestic gas prices must move towards global prices in the next few years, but the ability to discover large gas fields internationally where demand is high and prices are two to three times greater is most compelling.”

A 330km 2D seismic program is already underway in the tenements, following a 15km test line acquired in July.

Depending on the seismic results, exploration drilling will begin in the 2008-09 financial year subject to rig availability.

Located in northeast Spain, the Ebro Basin is separated from the petrolific Aquitaine Basin in southwest France by the Pyrenees Mountains.

The Aquitaine Basin’s estimated recoverable reserves are 11 trillion cubic feet of gas and 470 million barrels of oil recoverable reserves.

With its “very large” structures and known hydrocarbon seeps, the Ebro Basin is believed to contain natural gas fields with up to 1Tcf of recoverable volumes.