LNG INVESTMENT TO BOOST ICON PROSPECTS

FORMER Santos senior executive and Icon Energy new recruit Wesley Granville, says Gladstone LNG’s (GLNG) $16 billion joint venture investment will put Queensland’s gas industry on the global map.|

With the backing of several national and global gas companies including Santos, Petronas, Total and KOGAS, work will start on the 420 km gas pipeline from Roma to Gladstone this year. It will allow coal seam gas (CSG) to be piped to Gladstone where a newly constructed production plant on Curtis Island will convert the gas to its liquefied state and prepare for export.

“This is a major industry development,” says Granville.

“There are three significant project proposals in central Queensland, all with serious capital expenditure in the state. Once completed, Queensland’s CSG sector will be among the largest in the world.

“What this signifies is that some of the world’s biggest energy companies are dedicated to developing a significant CSG industry in Queensland. It certainly will put the state on the map.”

Icon Energy has exploration grants for tenements in central Queensland, the Surat Basin and in the far west on the Queensland, South Australian border.

The company experienced minor access difficulties during January’s flooding, but no equipment damage was recorded.

The signing of a general service agreement to supply China’s Shenzhen SinoGas with 40 million tonnes of LNG is still pending, despite Icon setting a deadline of December 31, 2010.

The deal could earn the Bundall-based company $32 billion by 2020, but some shareholders are expressing impatience at several delays. Others have expressed concerns about Icon’s disappointing results and remain sceptical that the company will produce the volume to meet China’s demand.

Since the announcement of the deal in April shares have dropped more than 40 per cent.

“The latest delay in the agreement has been caused by a great deal of support gathering in the Guangdong province of China,” says Glanville.

“This has lead to Shenzhen SinoGas to seek a joint venture with a Chinese state-owned company. This has occurred and the new entity, called Shenzhen SinoEnergy, is going down the path to have all the necessary approvals in place.

“It needs to be understood that these offshore deals take time, particularly when working with a culture with a different way of doing business.”

Glanville says the involvement of the state is positive and that Icon expects to be notified of Shenzhen SinoEnergy’s position within the next quarter.

While welcoming the GLNG pipeline approval, he says Icon will explore ‘a few options’ for the future transportation of its CSG.

Premier Anna Bligh says the pipeline will ensure the state’s future prosperity and be an important economic aid in the recovery from the flood crisis. Around 5000 construction jobs will be created plus a permanent workforce of around 1000.

“This project, worth about $120 billion in exports over 20 years, and others like it, will inject billions into the Queensland and regional economies,” says Bligh.

“The millions of dollars in state royalties this project will generate will help bolster the State’s economic recovery after the devastating floods. We need to be able to look to the future with hope and optimism and the LNG industry will play an important part in our State’s recovery from this flood crisis.”

GLNG has been one of Queensland’s most active resources companies, having invested more than $1 billion into the State, including more than $440 million with Queensland suppliers in 2009 alone.

The company is expected to export LNG from 2015 with a capacity of 7.8 million tonnes per annum.