In a report released to the ASX today, the company said the 10-year supply contract was expected to generate $A200 million in revenue to Sydney Gas.

Camden is currently producing 4PJ of gas per year, but this is expected to increase to 14.5PJ over the next three years, it said.

“Production of CSM has grown substantially over the last 12 months and sales reached $A1 million for the first time in October 2005,” company secretary Stephen Kwik said.

“This level of production has been sustained over the past three months.”

Record output of 350 terajoules and sales of $1.069 million was recorded in December last year, he said.

January output was slightly lower at 322TJ, with sales of $982,000, due to a two-day planned plant shutdown and two days for scheduled compressor maintenance at one of Camden’s two production plants.

However, average production per producing well in January increased to 186 gigajoules per day, a 3% increase on December’s average production per well.

Sydney Gas said its joint venture with AGL had also started an aggressive exploration program, due to be completed by 2008, in several permit areas to increase its reserve base. The JV expects to spend approximately $34 million on this program.

Meanwhile, Sydney Gas said exploration at the JV’s Hunter Valley and Merriwa projects had provided encouraging results.

The company has drilled two wells in the Hunter tenements, one of which is flowing gas at 400 thousand cubic feet per day. This well was shut in and pressure gauges installed to monitor pressure build-up.

About 675 billion cubic feet of potential gas in-place has been identified at the Hunter Valley project over a 100 square kilometre area from five seams with aggregate net coal thickness of 15m, Sydney Gas said. The JV has drawn up a development drilling program to begin in the middle of this year.

At Merriwa, an internal study has identified about 2.18 trillion cubic feet of gas-in place over 180sq.km from 12 seams based on available geological data, Sydney Gas said.

The JV was formed in November last year, under which AGL paid Sydney Gas $42.25 million for a 50% interest in all of its petroleum assets. AGL is responsible for management of the Rosalind Park and Ray Beddoe gas plants at Camden, and development of the Camden leases. All exploration and production development expenses, as well as sales revenue, are shared equally.