AGL Energy Ltd., Australia's biggest electricity and gas retailer, agreed to invest A$37 million ($36 million) in a coal seam gas project with Galilee Energy Ltd., a 68 percent-owned unit of Eastern Corp., as it expands supplies.

AGL will own 50 percent and be the operator of the joint venture, based on the ATP529P license in Queensland state, the Sydney-based company said today in a statement to the Australian stock exchange. The partners also entered a 10-year gas marketing agreement. Eastern surged the most in seven months.

Brisbane-based Eastern estimates the ATP529P license and the adjacent ATP799P permit may hold more than 20 trillion cubic feet of gas. AGL is Australia's second-biggest producer of natural gas from coal seams and is the largest shareholder in Queensland Gas Co., BG Group Plc's partner in a liquefied natural gas project in Gladstone, on Queensland's eastern coast.

``This farm-in agreement is a further step in growing AGL's gas reserves through targeted exploration and appraisal drilling,'' AGL Managing Director Michael Fraser said in the statement. ``This transaction provides Galilee Energy certainty for the next stage of development to prove up reserves.''

AGL fell as much as 25 cents, or 1.8 percent, to A$13.89 in Sydney trading and was at A$14 at 11:03 a.m. local time. Eastern jumped as much as 12.5 cents, or 45 percent, to 40 cents and was at 37 cents at the same time.

BG, Petroliam Nasional Bhd. and Royal Dutch Shell Plc are among international companies that have this year invested in coal seam gas ventures in Queensland state with the aim of converting the fuel into gas for export. Coal seam gas produced in Queensland is also used in power generation.