Strike, Warrego align for West Erregulla development

Oct. 19, 2020

Operator Strike Energy Ltd. and joint venture partner Warrego Energy Ltd. have executed a binding heads of agreement ensuring alignment for development of West Erregulla gas field in onshore North Perth basin permit EP469.

The agreement provides a pathway for Phase 1 development including gas processing and plant capacity, gas balancing, and gas sales. It also ensures optimization of timing of critical activities like a final investment decision and the current appraisal drilling program.

Phase 1 development is reliant on FID by the end of first-quarter 2021 along with completion of documentation for gas processing and completion of limited due diligence.

The JV has agreed an increase in Phase 1 capacity to 80 terajoules/day of gas delivered to the nearby Dampier to Bunbury gas trunkline. Australian Gas Infrastructure Group remains the preferred proponent to build, own, and operate the gas facility and will complete a supplementary FEED study to take account of the increased capacity by yearend.

Phase 1 construction financing will be sought on a coordinated basis.

The expected FID date is predicated on completion of drilling, testing, and evaluation of West Erregulla-3 appraisal and possibly West Erregulla-4. Target date for first gas sales remains mid-2022.

The JV also has approved the addition of West Erregulla-5 to the appraisal drilling program. The well is unlikely to be drilled before FID.

The gas balancing arrangement will align the interests with respect to the difference in total contracted volumes and contract commencement dates for each foundation gas agreement.

Warrego has contracted to supply 155 petajoules of gas from the field from January 2024 to Alcoa of Australia while Strike has signed a 100 petajoule supply deal with Wesfarmers beginning in second-half 2022. Both deals are subject to project FID (OGJ Online, Aug. 31, 2020; Oct. 5, 2020).

The rationale for the alignment agreement is to ensure the seamless delivery of sales gas to foundation customers and enable the JV partners to sell uncontracted gas on an equal basis.

Marketing of additional capacity over and above the foundation gas sales will continue, but further gas sales are not needed to achieve FID.

Strike and Warrego each hold 50% interest in the project.