Central Petroleum and Incitec Pivot join forces in Queensland

Junior oil and gas company Central Petroleum (ASX: CTP) could soon be adding fresh acreage and renewed exploration impetus into its portfolio after the natural gas explorer announced it was the preferred bidder for the Queensland Government’s tender for acreage (PLR201718-1-1), a 77 square kilometre plot of land dedicated to supplying the domestic Australian market.

The tender area is located in the Surat Basin, approximately 28 kilometres northwest of Miles and is highly prospective for coal seam gas (CSG).

More specifically, Central Petroleum says that a “CSG fairway” adjacent to already granted petroleum licenses makes this land release important for its commercial plans this year.

In a statement to shareholders, The Honourable Dr Anthony Lynham, Member of Parliament for Queensland, announced that Central Petroleum’s subsidiary was the preferred bidder in partnership with its working partner, Incitec Pivot (ASX: IPL), Australia’s largest supplier of fertilisers and the largest supplier of explosives in North America.

By forming a 50:50 joint-venture partnership, Incitec Pivot and Central Petroleum plan to develop a natural gas bearing project in Queensland with any obtained acreage to be developed in “support of the long-term viability of Incitec’s Gibson Island fertiliser facility in Queensland,” according to Central Petroleum.

The two parties have signed a Memorandum of Understanding and intend to conduct appraisal and drilling if its bid is accepted by the Queensland Government.

If proven reserves are confirmed and acreage is developed further, gas production is expected by around 2022, according to Incitec Pivot.

IPL Managing Director & CEO, Ms Jeanne Johns, said: “We were very pleased to partner with Central in support of its tender application for this tenement.

While the economics for the supply of gas on both an interim and longer term basis remain challenging, the award of this acreage to Central Petroleum by the Queensland Government creates a pathway for IPL to work with Central to secure an affordable source of gas for our Gibson Island plant.”

The ASX junior also reports that Incitec Pivot is committed to allocating up to $20 million in capex funding for exploration and appraisal purposes, as part of the envisaged project.

“This award of acreage is designed to provide a pathway to preserving the Queensland manufacturing industry and to stimulate exploration in Queensland,” said Richard Cottee, Managing Director of Central Petroleum Limited.

“This year promises to be a year of exponential growth for Central with its drilling program in the Amadeus, the upgrade of the processing plant, and this exploration in Queensland,” he said.

Upon announcing news of its preferred tenderer status this morning, Central Petroleum shares traded as high as $0.11 per share, up 16%.