The pipeline will give Wellington a gas-fired power station which will be run by ERM Power - Andy Pitlick one of its key executives will be at the community engagement meeting tomorrow.

Santos will acquire 100 per cent of Eastern Star Gas (ESG), and then on-sell a 20 per cent interest in the company’s permits in the Gunnedah Basin to TRUenergy for $284 million.

That would give Santos 80 per cent of ESG’s coal seam gas permits in the Gunnedah Basin, with TRUenergy holding 20 per cent.

Santos chief executive David Knox believes: “We’re going to set the right pace and bring (the community) along, as we prove things up … We recognise the criticality of working with local communities.”

TRUenergy says its stake in the gas project helps ensure future supplies for its power generation needs.

ESG shareholders will receive 0.068 Santos shares for every ESG share they currently hold under the deal.

Based on Santos’ closing price of $13.23 last Friday, that would value ESG at $0.90 a share, or a total of $924 million.

That would be about 30 cents a share above ESG’s closing price on Friday of 59.5 cents.

Santos says the acquisition builds on its existing NSW gas holdings, and will give it the largest natural gas reserves position of any company.

Mr Knox says the acquisition positions the company well for an expected surge in natural gas demand.

“This transaction represents the next major step in Santos’ eastern Australia gas strategy and positions the company to meet the expected increase in demand for natural gas from both domestic power generation and export LNG markets,” he said in a statement.

“The acquisition of ESG is a unique opportunity to consolidate our Gunnedah Basin interests and establish the leading position in Australia’s next major natural gas province.”

Santos has also sought to quell community concern about potential environmental degrading that may be caused by the gas developments.

“We are aware of a number of important issues raised by local farmers and other land users concerning the longer term development of the Gunnedah Basin, one of which is the proposed Narrabri to Wellington pipeline,” said Santos vice president for eastern Australia James Baulderstone in a statement.

“We are confident we can address community concerns in that regard and we will be explaining these plans to the community in the near future, once we have completed our review of Eastern Star’s plans.”