Brisbane-based Armour Energy Ltd. has executed a gas sales agreement with the Origin Energy Ltd.-led Australia Pacific LNG group for the supply of 1.8 petajoules of gas from Armour’s Kincora Roma Shelf gas project in the Surat basin of southeast Queensland to APLNG’s LNG plant on Curtis Island near Gladstone over a minimum of 5 years.
The deal provides cash flow certainty for the first years of Armour’s restart of the Kincora gas production as well as providing another secure source of gas for APLNG.
Armour has retained the right to supply the broader gas market, including industrial companies, wholesale customers, and traders and other LNG producers after the commitments to APLNG have been met.
Phase 1 of the Kincora restart program involves commissioning and then increasing production rate to around 9 terajoules/day, or 3.3 petajoules/year, from the Newstead storage facility and then bringing back on stream various fields in the region.
The start of gas production and commencement of gas sales is scheduled for June 2017. The balance of the restart program, including bringing on stream the associated liquids, is scheduled for completion in August-September 2017.
Phase 2 will involve drilling new wells plus workovers and stimulations of existing wells to bring production up to 20 terajoules/day over a period of 12-18 months from the beginning of gas production.
This production rate is 80% of the Kincora gas plant name plate capacity and plans will be developed to achieve 100% plant capacity.
Armour says that the Newstead storage facility that is key to the offtake arrangements with APLNG currently holds 2.3 petajoules of sales quality gas. This will require minimal reprocessing before it is sent to market via the hub at Wallumbilla. Newstead has the capacity to hold 7.5 petajoules.
Armour bought Kincora-Newstead fields and facilities from Origin Energy in September last year for $13 million (Aus.).
APLNG is a consortium of Origin with 37.5% interest, ConocoPhillips 37.5%, and Sinopec Ltd. 25%.