But there are fears the gas could be sent overseas.
Federal Resources Minister Matt Canavan announced the $6 million grant for Westside Corporation and three other gas producers last month as part of the $26 million Gas Acceleration Program, which was created to boost gas supplies to the domestic market and put downward pressure on prices.
Westside is part of the Chinese-owned Landbridge Group, which also has the 99-year lease on Darwin Port.
A government grants specialist has told the ABC that under the agreement there is nothing stopping Westside sending the gas overseas.
Ben Cusack, from government grants consultancy Bulletpoint, has told the national broadcaster that there is nothing in the Commonwealth’s grant agreement to stop Westside from selling gas sourced from 10 new wells that will be fast tracked by the grant money to international markets.
“The contractual terms of a grant agreement mean that they need to spend money on eligible capital equipment,” Mr Cusack told the ABC.
“In theory Westside could develop the gas processing facilities and send the gas offshore.”
The single lateral wells, to be drilled at the company’s Greater Meridian Fields in Queensland’s Bowen Basin, were set to be developed in 2021 but the grant money from the GAP program will help bring the $14.3 million project forward a year.
It’s expected the wells will produce an estimated 1.7 petajoules of gas by June 2020 and 12 petajoules over the life of the wells.
Overall, the GAP program aims to supply an extra 12.4 petajoules of gas to the East Coast market by June 2020 to put downward pressure on prices and prevent a shortfall.
A Westside spokesman has told the ABC that none of the gas from the 10 wells would be supplied to international markets.
“Westside will be signing a formal agreement with the Government over the coming weeks,” he said.
“The drilling of these wells will commence later this year.”
But Landbridge’s Chinese website reportedly says the natural gas produced by Westside Corporation Limited was currently “ultimately shipped to South East Asia predominantly”.
The Westside spokesman told the ABC 100 per cent of the Corporation’s gas was currently sold to the Gladstone Liquified Natural Gas project under a contract signed in 2014.
“Whether it is then exported is a matter for GLNG and over which Westside has no control,” the spokesman said.
The spokesman also rejected claims the company was acting as an arm of the Chinese government.
“Landbridge is a private Chinese company and is not state-owned,” he told the ABC.
The group has previously denied its founder and chairman, Chinese billionaire Ye Cheng, was a member of the Communist Party.
Australian Strategic Policy Institute executive director Peter Jennings told the ABC it was believed Landbridge was “really acting as an arm of the Chinese Government” when it made big foreign investment decisions overseas.
“There is reach back to the Chinese Communist Party and to the Chinese intelligence apparatus, and that’s something that we should be concerned about,” he said.