Qld Gas Adds Pipeline To Defence
Sydney Morning Herald
Friday October 13, 2006
QUEENSLAND Gas Co has taken another step to boost its value in the face of a $606 million bid from Santos. A day after QGC announced an increase in gas contracts, it told the market it was applying for permission to build a 152-kilometre gas pipeline to the Wallumbilla hub in south-east Queensland.
Connecting with Wallumbilla would give QGC far more flexibility in its gas sales and marketing than it had at the moment, managing director Richard Cottee said. "It means we can go through to Adelaide on one tariff (if a promised connector is built). We can get to Mt Isa, Gladstone and Sydney," he said. At present QGC sends its gas to Brisbane via the Roma gas pipeline. Mr Cottee said he could not release details of the project's expected cost because he was acting under takeover rules following the Santos bid, which QGC has rejected, describing it as opportunistic. As well as allowing QGC to access new markets, the pipeline would give it extra marketing flexibility by acting as a storage facility. Gas can be held in a pipeline until prices rise. Construction costs on the pipeline would be minimal as most of its route follows the Warrego highway, he said. ABN Amro Morgans analyst Chris Brown agreed the pipeline would enhance flexibility for QGC. He said the discovery and increasing exploitation of Queensland's coal-seam gas would make it hard for the proposed PNG pipeline to be built. Coal seam gas could supply the Australian market at low prices while gas from the PNG highlands was more likely to be sold into the world market where prices were rising strongly. A few years ago international gas prices were about $US2.50 to $US3 a gigajoule while local prices were at similar levels in Australian dollars. Now world prices have rocketed to between $US5 and $US7 a gigajoule while Australian prices have been relatively flat. Santos's $1.26-a-share bid for QGC was at the lower end of valuations, he said, and QGC was boosting its value by finding and capitalising on new deposits.
© 2006 Sydney Morning Herald
