Australia's Origin halts coal seam gas drilling on asbestos fears

MELBOURNE, March 13 (Reuters) - Origin Energy ORG.AX , in charge of coal seam gas drilling for the Australia Pacific liquefied natural gas (LNG) project, said on Thursday it had stopped work at 12 sites in Queensland state as asbestos had been found in drilling fluids it was using.

Origin said the supplier of some of its drilling fluids, Australian Mud Company (AMC), owned by Imdex Ltd IMD.AX , had found that its imported walnut-shell based product NUTPLUG contained asbestos.

The asbestos scare is likely to add to concerns over coal seam gas drilling. Farmers and environmentalists already fear that "fracking", a drilling technique that uses high-pressure water, sand and chemicals to extract gas trapped in rock, could contaminate water supplies.

Origin said it was providing support to anyone who may have been exposed to the drilling fluids.

A company spokeswoman was not immediately available to comment on whether any workers or landowners around the drilling sites had been affected or what impact the drilling problem might have on the Asia-Pacific LNG project, which is due to start exporting in mid-2015.

AMC is withdrawing its NUTPLUG product from the market and investigating where it came from, Origin said. AMC officials were not immediately available for comment.

Origin is a 37.5 percent owner of the Australia Pacific LNG project, alongside ConocoPhillips COP.N with 37.5 percent and China's Sinopec 600028.SS with 25 percent.

Origin stock slipped 0.6 percent to A$14.48, while Imdex's shares fell 1.5 percent to A$0.67 in a broader market that was up 0.7 percent.

(Reporting by Sonali Paul; Editing by Joseph Radford)

((Sonali.Paul@thomsonreuters.com)(+61 3 9286 1419)(Reuters Messaging: sonali.paul.thomsonreuters.com@reuters.net))

Keywords: AUSTRALIA ORIGINENERGY/ASBESTOS