GOLD Coast gas explorer Icon Energy Limited (ASX: ICN) has signed a binding sales agreement with a Chinese energy company to supply 40 million tonnes of LNG, worth potentially $32 billion, over 20 years.

The mammoth deal with Shantou Sinogas Energy Co. has been on the cards since April 2010, when the Chinese corporation was known as Shenzhen Sino Industrial Development Co.

The signing of the official LNG Sales Agreement will be welcome news for Icon Energy shareholder, who at last year’s Icon annual general meeting grilled the board about the ongoing delays.

Terms of agreement will see China Guodian Corporation joining Shantou SinoEnergy in a joint venture and the construction of a $727 million receiving terminal and re-gasification facility on Nan’ao Island near Shantou.

Icon Energy, which is still in the exploration stage, must find gas reserves of at least 2 trillion cubic feet (TCF) of Proven and Probable Reserves (2P) and begin executing the deal by June 2016.

CEO Ray James (pictured) is not fazed with the task ahead. In a media statement released today he says the supply terms give Icon Energy flexibility to supplement its own resources with suitable contracted third party feedstock gas.

That flexibility could serve to unlock significant reserves of stranded gas in Queensland and elsewhere.

“I envisage commencing discussions with identified and prospective co-venturers in the next couple of months, with a view to building Icon Energy’s gas bank,” says James.

“Another critical term of the agreement with Shantou SinoEnergy is that Icon Energy is not locked into supplying LNG from a single nominated port. We have already considered Queensland and South Australian based options and are currently in the process of reviewing co-operative arrangements with one of the many Gladstone LNG projects for supply out of Queensland.

“This is an exciting growth project for Icon Energy and comes at a time when the Company is just about to launch the most vigorous drilling programme in the Company’s history.”

The deal marks a historical day for Icon. Shareholders are hoping it won’t be marred by a legal stoush with Adelaide-based miner Beach Energy, which claims it’s entitled to a 40 per cent stake in Icon’s prized ATP855P tenement.

Beach last week commenced legal action against Icon, claiming an agreement had been met that would see Beach operate farmin activity at the promising shale gas tenement, located in far western Queensland at the South Australian border.

Icon Energy company secretary and general counsel Wesley Glanville, says no agreement was entered into and claims a lack of official documentation will be used as evidence. Icon received the initial proposal 17 months ago but Glanville says the negotiation process had yet to occur.

“The proposal was subject to negotiation and the execution of a range of documents and we haven’t got to that position yet,” he says.

“They should know that in this business you don’t make significant operational agreements on two-page documents.

“All we’ve seen in that 17-month period has been two pages outlining the proposal. The proposal also included entry into a share subscription agreement and we only received those documents on Thursday. The (lack of) documentation should speak for itself.

“We absolutely will defend our position in any forum and have given Beach notice of that.”

Icon Energy has been in a trading halt since yesterday.

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