Australia's Strike Energy inks gas supply option for southern Cooper Basin

Sydney (Platts)--26Feb2014/1047 pm EST/347 GMT


Strike Energy has entered an option agreement with Brickworks subsidiary Austral Bricks for the supply of 12.5 petajoules of gas from its yet-to-be-developed southern Cooper Basin project in permit area PEL 96, the company said Thursday.

The gas would be delivered to Austral Bricks at a rate of 1.25 Pj/year at a fixed price over a 10-year term from 2017, the expected start date of production from the project.

Austral Bricks will pay Strike an option fee, conditional only on the PEL 96 joint venture proceeding with a pilot production test project. Austral Bricks can exercise the option when a decision is made by the PEL 96 joint venture to proceed with development of the project.

Strike plans to use the option fee to accelerate the PEL 96 work program. The company recently confirmed the existence of a substantial, continuous gas resource in the permit, directly under the Moomba to Adelaide gas pipeline.

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The agreement with Austral Bricks complements an option deal signed by Strike in January with local packing company Orora for 30 Pj of gas from the southern Cooper Basin over a 10-year period. The two option agreements follow Strike's July 2013 deal to supply chemicals manufacturer Orica up to 150 Pj of gas over a 20-year term.

"Our next goal is to demonstrate sustained gas flows to surface within the PEL 96 permit areas, with work planned to commence next quarter," said Strike Managing Director David Wrench.

"This initial production testing program will be funded by gas supply prepayments and option agreement payments and is the first stage of a drilling, completion and production optimization program designed to establish commercial well productivity," he added.

"With the delineation of a very substantial gas resource and established gas supply arrangements, further demonstration of the commercial potential of the gas resource is now our key focus."

The PEL 96 permit is operated and 66.67% held by Strike, alongside 33.33% partner Energy World Corporation. Following a recent appraisal drilling program, Strike put its best estimate net prospective resource in PEL 96 at 4.5 Tcf.

Gas consumers in eastern Australia are facing a supply crunch as existing long-term contracts roll off in 2014-2016. The time frame coincides with a trebling in eastern Australia's demand to more than 2,000 Pj/year as three new coalseam gas-to-LNG export projects come online in Queensland.

--Christine Forster, christine.forster@platts.com
--Edited by Irene Tang, irene.tang@platts.com

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