The largest producer of CBM in the country, Oil Company of Australia (OCA), has signed a 10-year agreement to supply gas to Australian Magnesium Corporation (AMC) for its new $1.3billion magnesium production facility in Stanwell, central Queensland.

The deal is for 5.4 petajoules per annum and will be sourced from OCA's central Qld CBM fields.

Industry commentators from the pipeline sector said the news was a further blow for the embattled PNG pipeline project. It was the bridesmaid again recently in the quest to supply the Townsville power station with feedstock gas. That contact was won by CBM new chum, CH4 Pty Ltd.

OCA executive, John Piper said, "This contract is a significant vote of confidence that CBM provides a reliable source of energy for supply to major industrial gas loads. AMC's decision demonstrates that there are significant opportunities to locate large key projects in Queensland close to resources and a substantial competitive source of gas.

"The last four significant contracts for gas supply in Queensland have been awarded to CBM suppliers, " Mr Piper said. Located 30 km to the west of Rockhampton, AMC's Stanwell Magnesium plant will produce 97,000 tonnes of magnesium and magnesium alloys for use predominantly in the manufacture of the automotive components.

The 5.4 petajoule contract covers the gas requirements for AMC's Stanwell Plant and AMC's existing Queensland Magnesia operation at Parkhurst, Rockhampton. The contract is conditional upon all necessary approvals and finalisation of a gas transportation agreement.