Gastar Exploration Ltd. together with its joint venture partner Eastern Star Gas Limited have entered into a Heads of Agreement (HoA) with the APA Group (APA), owner of the Central West and Moomba Sydney Gas Pipelines. Under the HoA, options for early delivery of coal seam gas from PEL 238 into the New South Wales ("NSW") gas market are to be investigated.

Under the HoA, it is anticipated that coal seam gas would be initially delivered to New South Wales gas markets via APA's Central West Pipeline, with APA's NSW pipeline system to subsequently be expanded as gas production and markets grow. By matching gas production, pipeline and market requirements in this manner, Gastar and ESG can minimize capital requirements, while realizing favorable gas transportation tariffs.

J. Russell Porter, Gastar's Chairman, President and CEO stated, "Gastar and ESG plan to work with APA to develop arrangements that could potentially involve the construction of a new pipeline lateral to connect our PEL 238 Narrabri coal seam gas project into APA's existing gas transmission pipeline system. By utilizing existing infrastructure, early market access could be secured, while complementing the later large-scale gas supply agreements anticipated by our existing MoU's with Macquarie Generation and Babcock & Brown."

Mr. Porter continued, "Securing early access to markets in Sydney and other New South Wales gas markets is of particular interest since we believe it is possible that gas production rates from the multi-lateral pilot production wells to be drilled by the joint venture later this year could, by mid-2009, be in excess of the volumes that can be used in the Wilga Park Power Station, even with the proposed expansion of the power station. Having early direct access to New South Wales gas markets will allow additional marketing opportunities to be pursued as well."

Tags: APA Group, Eastern Star Gas Limited, Gastar Exploration Ltd.