CENTRAL PETROLEUM has started selling gas from its Palm Valley gas field to the Northern Territory’s Power and Water Corporation (PWC) under the terms of a gas sale and purchase agreement first executed in September 2012.

The company will sell about two terajoules of gas per day from the project – an incremental about to the level of gas already being produced from the facility under a gas sales agreement with Santos.

Central said the move would provide an acceleration of gas sales revenue with only a small incremental operating cost.

The sales come ahead of the start of production from the neighbouring Dingo gas field which remains on schedule and under budget, with completion expected to be in the second quarter of this year.

Completing the project under budget means Central will construct the project below the Macquarie debt facility limit of $50 million announced in February last year.

Central Petroleum managing director Richard Cottee said the move was another step in establishing Central as a gas supplier to the domestic gas markets.

Last year’s acquisition of the Dingo and Palm Valley assets from Magellan Petroleum Australia saw Central transition from explorer to domestic gas producer and supplier in the first quarter of 2014.

The company was in a strong positon, he said, with revenues based on fixed domestic gas prices with escalation based on the consumer price index.

The agreement supported Central’s own Gas Acceleration Program and the North East Gas Interconnect, he added.

Palm Valley is 120 kilometres west of Alice Springs, in the Northern Territory.

The gas is reservoired in tight matrix and an extensive fracture system in the Lower Stairway sandstone, Horn Valley Siltstone and Pacoota sandstone at depths from 1,800 to 2,200 metres.