Australian Coal-Seam Gas Shares Rise on Conoco-Origin Agreement

By Dinakar Sethuraman

Sept. 8 (Bloomberg) -- Queensland Gas Co. led gains among Australian coal-seam gas producers in Sydney trading after ConocoPhillips agreed to pay as much as $8 billion to join Origin Energy Ltd. in a venture to export the fuel.

Queensland Gas rose as much as 30.6 percent to A$4.82, the biggest advance in 3 1/2 years. Arrow Energy Ltd., which plans a venture with Royal Dutch Shell Plc to produce liquefied natural gas from coal seams, rose as much as 11 percent to A$3.27, the highest in seven months. Santos Ltd. climbed 10 percent.

ConocoPhillips plans to take a 50 percent stake in Origin's coal-seam gas business to tap the ``voracious appetite'' for LNG, gas cooled to liquid form for transportation by tanker. LNG demand is set to increase by 10 percent a year through 2015, more than five times projected gains in crude oil, according to Citigroup Inc.

``The Origin deal was very good and has more to do with the volume of gas and the confidence Conoco has about the gas reserves that are there,'' said Mark Greenwood, a Sydney-based analyst with JPMorgan Chase & Co. ``Origin is now talking of four LNG trains'' compared with earlier plans for two production units.

Queensland Gas, which offered on Aug. 20 at least A$837 million ($696 million) for Sunshine Gas, is partnering Reading, U.K.-based BG Group Plc in a planned A$8 billion LNG export project in Gladstone in northeastern Australia.

Petroliam Nasional Bhd., Malaysia's state oil company, agreed in May to pay $2.51 billion to buy 40 percent of Santos's planned liquefied natural gas project in Australia.

Royal Dutch Shell Plc, Europe's biggest oil company, agreed to a A$700 million venture with Arrow to extract gas from coal seams.

Coal-seam gas, mostly comprising methane, bonds as a thin film on the surface of coal and is released when pressure is reduced, usually after water is removed.

To contact the reporter on this story: Dinakar Sethuraman in Singapore at dinakar@bloomberg.net.