Dart Plans Coal-Seam Gas Drilling in Sydney Later This Year

Dart Energy Ltd. (DTE) said it plans to drill for coal-seam gas in Sydney, Australia’s most populous city, in the second half of 2011 as part of a 10-well exploration campaign in the state of New South Wales.

Dart, which is also developing coal-bed methane assets in China, India, Indonesia, Vietnam and Europe, expects to spend about A$16 million ($17 million) this year on the New South Wales drilling program, said Robbert de Weijer, Dart’s manager in Australia. Dart aims to start selling the New South Wales gas in 2013, focusing mainly on the domestic market, he said.

“There’s lots of gas underneath the city of Sydney,” he said. “It’s definitely an attractive resource. The challenge is around getting to a place where we can drill and develop that area in a way that’s supported by the community.”

Dart’s New South Wales portfolio of coal-bed methane assets holds 12.3 trillion cubic feet of prospective gas resources, the company said yesterday, citing a consultant’s estimates. More than a third of those resources are in the Sydney license area, according to Dart, which has seven blocks in the state.

Dart, which completed the acquisition of Apollo Gas Ltd. earlier this year, received state approval today to proceed with a Sydney well, de Weijer said. The company isn’t planning any hydraulic fracturing, a technique that shoots water, sand and chemicals into the ground to extract the gas, in New South Wales.

Concerns Over Drilling

“We’ve got to go out there and explain it to people and talk about their concerns,” he said. “It’s a big task for the industry to put some facts on the table and to really engage and say, OK, how can we address these concerns so we can co-exist.”

An Apollo Gas unit, Macquarie Energy Pty, was granted the Sydney exploration license in the suburb of St. Peters in October 2008 by the New South Wales state government.

Dart was unchanged at 91 Australian cents a share in Sydney at the 4:10 p.m. close, valuing the company at A$534 million, compared with a 0.7 percent gain for the benchmark S&P/ASX 200 Index. Dart has fallen 21 percent this year.

The company, whose main office is in Singapore, is also evaluating further coal-seam gas acquisitions in New South Wales after the Apollo purchase, he said. Dart was spun off from Arrow Energy, the Brisbane-based gas producer acquired last year by Royal Dutch Shell Plc (RDSA) and PetroChina Co. for A$3.5 billion.

“There are a lot of relatively small coal-seam gas companies around, so it would make sense for some kind of consolidation, and we’d rather be the consolidator,” he said.

To contact the reporter on this story: James Paton in Sydney at jpaton4@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net

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