PERTH (miningweekly.com) – The New South Wales government has approached unconventional gas explorer Metgasco with an offer to buy back its three Northern Rivers petroleum exploration licences for A$25-million.

The settlement offer comes after protracted discussions that have been ongoing since July, and would see Metgasco settle legal disputes with the state government.

Under the terms of the transaction, the state government would pay A$25-million for the return of the three licences, with Metgasco withdrawing its legal action in relation to the unlawful suspension of the Rosella drilling approval.

Further, the state government would also return some A$400 000 currently held as securities and other fees, while Metgasco would be responsible for the decommissioning of its remaining two coal-seam gas wells, in exchange for the remaining A$240 000 of securities held.

While the deal was still up for shareholder vote, the board of Metgasco said on Monday the transaction was in the best interest of the company and would be recommended to shareholders.

“This has been a difficult decision for the board. The company has invested heavily in the Clarence Moreton basin for over ten years and has had significant success in demonstrating large gas resources. 

“It has many loyal shareholders, many of whom live in the licence areas and invested in the company because of the benefits a gas industry would bring to the region,” Metgasco chairperson Len Gill said on Monday.

He added that, while the identified gas resources could have a significant value if developed in an efficient and timely manner, the board had to consider the risks associated with ongoing project approval delays, higher costs and difficulties in financing activities over the next few years. 

“Similarly, the court action to seek damages from the unlawful drilling suspension could yield significant compensation. However, it is necessary to take into account that the court case could take some years to resolve and that, even if the company is successful, the damages awarded might be much lower than we seek. On balance, we believe it is better to accept the settlement and to move forward.”

Metgasco in September announced that it would take legal action against the New South Wales state government, claiming damages for the suspension of its 2014 drilling programme and preparing a judicial review over two of its licences.

The company had been in discussions with the state government since the Supreme Court in April overturned a suspension of drilling at Metgasco’s Rosella exploration well.

Metgasco turned to the Supreme Court last year after the New South Wales Office of Coal Seam Gas (OCSG) failed to amend a previous suspension of drilling activities at the Rosella exploration well.

Gill has, meanwhile, said more details about the company’s plans for the future would be released before the shareholder meeting.

“There is a strong worldwide demand for oil and gas, a demand that will continue for the foreseeable future. The depressed oil and gas market at present makes it an ideal time to pursue new oil and gas opportunities.

“Metgasco has reviewed a number of opportunities over the last two years and is confident of securing attractive opportunities, particularly when it can negotiate without uncertainties associated with its New South Wales assets.”

Meanwhile, greens group Gasfield Free Northern Rivers co-coordinator Elly Bird has welcomed news of the transaction.

“This is a day that people around our region have worked for and wanted for over three years. We’re over the moon that the government and the company have finally seen the light and decided that the community’s rejection of unconventional gas could not be overcome.

“Of course, it’s not over for our communities yet. There’s nothing to stop the government granting new licences to explore for gas in our region and, until there is protection in law for a gasfield-free Northern Rivers, we will continue to work together to achieve that.”