Gas Supply and Purchase

v2.4.0.6

Gas Supply and Purchase	9 Months Ended
	Mar. 31, 2012
Gas Supply and Purchase Agreement [Abstract]
Gas Supply and Purchase Agreement [Text Block]	Gas Supply and Purchase Agreement between Magellan Petroleum (N.T.) Pty Ltd and Santos QNT Pty Ltd On September 14, 2011, Magellan NT entered into a Gas Supply and Purchase Agreement (the “Santos Gas Contract”), dated September 14, 2011, with the Santos Entities (such transaction referred to herein as the “Santos Gas Contract”). See Note 6. The Santos Gas Contract is subject to Completion occurring under the Santos SA and provides for the sale by Magellan NT to the Santos Entities of a total contract gas quantity of 25.65 Petajoules over the 17 year term of the Santos Gas Contract, subject to certain limitations regarding deliverability into the Amadeus Pipeline. The term of the Santos Gas Contract shall commence on the later of Completion under the Santos SA, the first delivery of gas under a Santos Concession Gas Contract (defined below) or January 16, 2012, (when the existing gas sales agreement for the Palm Valley Gas Field expired) and will expire if the total contract gas quantity is reached before the expiry of 17 years. Under the Santos Gas Contract, the Santos Entities are required to use reasonable endeavors to enter into one or more agreements with their customers for the sale of gas solely from the Mereenie Gas Field, the Palm Valley Gas Field or other permissible fields under the Santos Gas Contract and that collectively will require an average aggregate daily contract quantity for each day during the term of the Santos Gas Contract of not less than 5.86 Terajoules (the “Santos Concession Gas Contract”). The price for gas supplied by Magellan NT shall be the weighted average of the prices obtained for all gas sold or to be sold during the relevant contract year. The Santos Gas Contract provides a detailed nomination procedure to be followed by the parties in determining the amount of gas that will be provided daily during each contract year. The maximum daily contract quantities under the Santos Gas Contract (the “Maximum DQ”) are based on a maximum annual contract quantity spread evenly over a year. In the last two (2) years of the term (known as the "Recovery Period"), the maximum annual contract quantity will be one half of the difference between the total contract quantity of 25.65 Petajoules and what has been sold to the Santos Entities by Magellan NT up to that date. On any day, Magellan NT is obliged (subject to the usual exceptions for planned and unplanned maintenance and force majeure) to supply the lesser of the Maximum DQ, the daily contract forecast quantities provided by Magellan NT prior to the commencement of a contract year, and 80% of the quantities nominated by the Santos Entities' customers under the Santos Concession Gas Contracts (the “Supply Obligation”). Since the term of the Santos Gas Contract did not commence by April 15, 2012 (90 days after the expiry of the existing gas sales agreement for the Palm Valley Gas Field): • The Company is entitled to a AUD $2.0 million payment in January 2013, provided the Santos SA is completed; • Under the Santos SA, the Bonus Amount associated with the lowest Threshold Level will decrease from AUD $5.0 million to AUD $2.0 million and the Bonus Amount associated with the second highest Threshold Level will be increased from AUD $0.3 million to AUD $1.3 million. • If, however, a Santos Concession Gas Contract is entered into part-way through 2012, the AUD $2.0 million payment and the Bonus Amounts will be decreased proportionately based on time. Because this transaction has not yet been finalized, our consideration of the accounting implications of this transaction is not complete as of this filing, and for this reason we are not in a position to provide an estimate of the financial effect of the transaction on the Company.