ARMOUR Energy will supply between one and two petajoules of shale gas per year to Aeon Metals’ Walford Creek base metals project in North West Queensland under a new gas supply arrangement.

Aeon and Armour signed a memorandum of understanding which will see gas supplied to the mine from Armour’s wholly-owned ATP 1087, which is located about 10 kilometres away.

Armour is seeking to commercialise its gas resources either through a new pipeline from its tenements in the Doomadgee/Burketown area, or via a micro liquefied natural gas or compressed natural gas scheme.

The company believes the 713,800 hectare ATP 1087 permit is Australia’s most promising shale gas prospect, with Armour chief executive Robbert de Weijer saying Aeon would be an important customer for the project.

The MOU has been signed subject to the further development of the parties’ respective projects, with pricing to be determined, based on ensuring an acceptable return on invested capital for both parties.

If Armour decides to farm out its interests in the relevant tenements to third parties, gas supply to Aeon would only relate to Armour’s retained equity in the gas project, unless a future upstream partner elects to participate pro rata in the sale of gas to Aeon.

Aeon said the MOU with Armour was a positive contribution to the development of the project and the company planned to continue developing the Walford Creek base metals project located north of Mt Isa in Queensland.