CENTRAL Petroleum will supply up to 15 petajoules (PJ) of gas per year to fertiliser manufacturer Incitec Pivot (IPL) under a non-binding heads of agreement (HOA).

The two groups agreed on a starting field price for gas sold under the agreement which Central said would provide “a commercial underpinning for the development of the natural gas project.”

Central did not disclose what this price was, but company managing director Richard Cottee said it was “capable of sustaining industrial customers,” showing that gas supply from the Northern Territory to the eastern states domestic market could be economically viable.

“The most difficult part of any negotiations is price and that is the importance of this HOA. The precise form of financial support and the pipeline tariffs are still to be determined”, Mr Cottee said.

The agreement also sets out key milestones need to be met before a binding gas supply agreement can be sorted out. It will also see IPL provide Central with source capital for drilling and reserve certification.

“The agreement is akin to the first steps taken by QGC to contribute to the ongoing operations of Gibson Island in 2004 – that agreement was also negotiated by IPL’s James Fazzino and I,” Mr Cottee said.