Origin Energy Ltd. (ORG.AU), which plans to build a massive gas export project with ConocoPhillips (COP), said Wednesday it has bought coal seam gas assets in Queensland state for A$660 million from local entrepreneur Paul Fudge.

Origin is dipping into its large kitty of cash reserves to buy a 100% interest in exploration permit ATP 788P from Fudge's Pangaea group of companies.

Sydney-based Origin hit the money last year when it agreed to sell half of its CSG assets to ConocoPhillips for up to US$8 billion. The two also formed a joint venture to build a liquefied natural gas plant to be fed with CSG at Gladstone on the Queensland coast.

Origin's deal with Fudge is the sixth significant one in Queensland's CSG sector, which is attracting interest from multinationals and local partners keen to tap high projected Asian demand for cleaner-burning fuels.

The terms of the agreement with ConocoPhillips means the equal LNG joint venture has an option to buy the newly acquired CSG assets from Origin, essentially leaving it with a 50% stake. Origin Chief Executive Grant King said the JV hasn't yet indicated whether it will exercise its option within the agreed 30-day time limit.

Origin expects the acquisition will help it book an extra 1,150 petajoules of proved, possible and probable CSG reserves by June 30. These could either feed the LNG project or generators in the domestic market, where Origin is trying to boost its market share, King said.

Fudge, a former fabric trader, received 57 cents per gigajoule of CSG, which King said reflected the high quality of his acreage. That's about 15-20 cents a gigajoule higher than recent CSG transactions on a similar scale, including BG Group's acquisition of Pure Energy Resources and Arrow Energy's purchase of Beach Petroleum's CSG interests.

King explained that the permit is next to proven CSG fields in the "sweet spot" of Undulla Nose in Queensland's Surat Basin, characterized by high gas content, permeability and a more accessible resource.

Responding to growing concerns from analysts that its LNG plans could be delayed, King said there is no doubt that a global economic slowdown has made it significantly harder to find markets for LNG. But demand still exists for quality ventures with adequate reserves, he added.

Origin and ConocoPhillip's is one of three large-scale CSG-to-LNG projects planned for Gladstone and one of about a dozen LNG projects planned for the region.

ConocoPhillips, responsible for marketing, is currently talking to potential customers, King said.

"In our view, there's no question there's room for further LNG to be contracted long term, particularly into the Asia Pacific market," King told reporters on a conference call.

"But the pressure for buyers to contract sooner rather than later is less." Origin and ConocoPhillips want to make a final investment decision on their project by late next year.

Origin still has plenty of capacity on its balance sheet to make acquisitions and has indicated it will be interested in the retail energy assets of New South Wales state, which the government plans to privatize by the end of the year.

King said Origin is still interested in buying Woodside Petroleum Ltd.'s interest in the Otway gas project offshore Victoria state. "We will look at it closely and we will value it as best as we can," he said.

He wouldn't rule out buying more CSG assets in Queensland, but noted that while there is still plenty of available acreage there, the number of assets mature enough to confidently assess reserves levels is "clearly diminishing".

By Ross Kelly, Dow Jones Newswires; 61-2-8235-2957; ross.kelly@dowjones.com
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