Caol Seam Gas In The Gunnedah Basin  

The Age reports that activity in the coal seam gas sector continues unabated, with Santos looking to add to its position in the Gunnedah Basin, which is estimated to contain 50 tcf of gas - Santos turns up heat on gas plans with $476m Gunnedah deal.

SANTOS has bought a large stake in a company with neighbouring gas fields and advanced technology in NSW's Gunnedah Basin, so it can speed up the extraction and delivery process for its own coal seam gas reserves.

Santos yesterday bought a 20 per cent stake in Eastern Star Gas from Hillgrove Resources for $176 million, and paid Gastar Exploration $300 million for its 35 per cent interest in exploration permits and production areas operated by Eastern Star.

"The transaction … provides a basis for each party to work together to accelerate the development of the region and a range of commercialisation opportunities, including domestic gas supply, power generation and future LNG (liquefied natural gas) options," Santos chief executive David Knox said.

Santos is drilling 23 wells in the Gunnedah Basin, which it entered in 2007.

Spokesman Matthew Doman told BusinessDay that Santos would benefit from Eastern Star's knowledge of the local geology. "We are now pretty much in a joint venture," he said.

The combination of operated coal seam gas permits belonging to Santos and Eastern Star in the Gunnedah Basin covers an area of about 63,000 square kilometres, containing resource potential estimated to exceed 50 trillion cubic feet.

"What Santos brings to the table for us is more understanding of market growth opportunities," said Eastern Star managing director David Casey.

Santos is building a $7.7 billion facility in Gladstone, Queensland, with Malaysian gas company Petronas to store and transport liquefied natural gas (LNG) to Asia.

Mr Casey said the gas was unlikely to travel all the way from Gunnedah to Gladstone, and he would like to see LNG transportation facilities built in Newcastle.

He said Eastern Star had spent seven years developing its extraction technology in Gunnedah, where the coal lies parallel to the surface and must be extracted sideways.