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The Australian Gas Light Company (

  • AGL) has announced a significant step in executing its integrated energy company strategy by securing long-term gas supplies from Papua New Guinea (PNG) to support future demand in Eastern Australia and by making an investment in the upstream PNG Gas Project.


    These agreements comprise a US$4.5bn conditional gas supply agreement with the PNG Gas Project producers to purchase around 1,500 petajoules of gas over 20 years from 2009 and a US$300mn conditional agreement with Oil Search Limited to acquire an equity interest of 10% in the upstream PNG Gas Project.


    Both agreements are subject to conditions precedent including the PNG Gas Project reaching financial close. A final investment decision by the PNG producers is expected in the second half of 2006.


    “The gas supply agreement secures around 1500PJ of competitively priced gas to meet future customer demand in NSW, ACT and South Australia, as well as underpinning AGL‘s participation in the fast growing Queensland energy market. This agreement diversifies AGL‘s existing gas supply portfolio giving the company additional flexibility in meeting growing demand,” AGL managing director Greg Martin says.


    Commenting on the equity agreement Martin adds: “Part of AGL‘s integration strategy is to create value through equity investments in upstream gas reserves at attractive entry prices. The investment parameters agreed with Oil Search for the equity purchase will result in earnings per share accretion from day one.


    “These agreements complement AGL‘s existing commitment to build the Australian component of the PNG gas pipeline which includes a proposed extension to Gove in the Northern Territory. There is now greater certainty for the pipeline project for which AGL is the preferred developer in partnership with Malaysian company Petronas.


    “These transactions secure competitively priced, flexible wholesale gas supplies, an attractive equity investment in the upstream PNG Gas Project and provide additional infrastructure certainty which is another step in delivering AGL‘s integrated energy company strategy,” Martin concludes.