Shell Energy Australia will buy an additional 3 terajoules per day of gas from Independent Queensland producer Denison to boost supply into the constrained east coast market.

Denison has secured an additional supply contract with global heavyweight Shell, via its wholly owned Shell Energy Australia subsidiary, to supply a further 3 terajoules per day of gas to the east coast market from next year.

The company struck a three-year gas sales agreement (GSA) in late November last year to supply Shell Energy Australia for 5 terajoules per day.

The latest contract comes close on the heels of welcome news by the Australian government that gas producers will be exempt from its $12 per gigajoule price cap if they supply the domestic market and produce less than 100 petajoules per annum (about 274 terajoules per day).

The initial sales agreement took effect at the start of this year for gas supplied from Denison’s conventional fields in the Bowen Basin to Shell Energy Australia’s residential, commercial and industrial customers.

The new contract extends supply to Shell through to 2026.

“Following our inaugural GSA late in 2022, we are pleased to again be working with Shell after completing an extensive Expression of Interest process,” CEO Benson Wong said.

“The company continues to invest in the business with the goal of making more gas available to the east coast market in Australia.”

Denison has increased the production output of its assets eight-fold since acquiring them in 2019.

The company says it will continue to invest in development drilling activities and production capacity to further increase the supply of its gas to the domestic market in 2024 and beyond.

Denison announced in January a proposed partnership with Comet Ridge (ASX:COI) to undertake a jointly funded front-end engineering design (FEED) study to facilitate early gas production from Comet’s Mahalo North project in Queensland.

The FEED study will determine the requirements to upgrade Denison’s existing infrastructure to accommodate the supply of up to 10 terajoules per day of gas production from the Mahalo North project, located only 14km from the Denison infrastructure.

Denison’s existing infrastructure capacity, along with potential upgrades, provides the opportunity for the company to not only meet its own planned increases to production, but also consider aggregating other third-party gas supplies where appropriate.

This article was developed in collaboration with Denison Gas, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.