Alumina producer Alcoa of Australia is backing the development of a major new gas project that involves an investment in excess of $100 million and could supply 10 per cent of Western Australia's gas needs.
Alumina producer Alcoa of Australia is backing the development of a major new gas project that involves an investment in excess of $100 million and could supply 10 per cent of Western Australia's gas needs.
Alcoa and its partner have called for a review of state government royalties to support development of the Warro gas project, which is says will involve "very high capital funding", including the drilling of more than 200 wells.
Alcoa and unlisted Perth company Latent Petroleum have formed a joint venture to appraise and develop the Warro field, which will be the first 'tight' gas field developed in WA.
Listed company TranServ Australia Ltd will have a 10 per cent stake in the project, after converting a $3.6 million seed loan to Latent.
TranServ said its 10 per cent interest will be carried for the first $40 million in project expenditure.
After $40 million is spent, TranServ will contribute 15 per cent of the next $60 million in project spending, and thereafter will contribute in accordance with its 10 per cent working interest.
If proven to be commercially viable, Warro Gas will become a major supplier of domestic gas to industry.
The Warro deal follows Alcoa's 2007 agreement with ARC Energy, in which Alcoa pre-paid $40 million to support ARC Energy's gas exploration program in the Canning Basin.
Alcoa is one of the state's biggest gas consumers, using increasingly expensive gas from offshore North West fields.
"Western Australia is experiencing a serious shortage of gas with commercially viable supply failing to meet the State's growing demand. This has been exacerbated by the loss of supply from Varanus Island, and reinforces the importance of progression in finding new energy sources." Alcoa of Australia managing director Alan Cransberg said.
"The time to act is now. By partnering with Latent Petroleum, Alcoa is doing its part to find solutions and create a secure energy future for the State."
Full Alcoa / Latent statement below:
NEW JOINT VENTURE TO DEVELOP WA'S FIRST TIGHT GAS FIELD
Latent Petroleum and Alcoa of Australia Limited have officially formed a joint venture to appraise and develop the Warro Gas field.
If proven to be commercially viable, Warro Gas will become a major supplier of domestic gas to industry and will be the first commercially viable tight gas field in Western Australia.
The Warro Gas field, located 200km onshore north of Perth (60 kilometres east of Jurien) covers approximately 7,000 hectares, is about 4km below the surface and holds up to 5 TCF of gas in place.
Drilling is expected to commence in the fourth quarter of 2008 when a new rig will arrive from the USA, along with other equipment from overseas.
Latent Managing Director Stephen Keenihan said recent events had highlighted the critical need for a comprehensive and diverse range of energy suppliers in WA.
The Warro Gas field, located 200km onshore north of Perth (60 kilometres east of Jurien) covers approximately 7,000 hectares, is about 4km below the surface and holds up to 5 TCF of gas in place.
Drilling is expected to commence in the fourth quarter of 2008 when a new rig will arrive from the USA, along with other equipment from overseas.
Latent managing director Stephen Keenihan said recent events had highlighted the critical need for a comprehensive and diverse range of energy suppliers in WA.
"Warro would provide Western Australia with an alternative and new supply of gas to help keep up with the increasing demand for energy for the domestic market," Mr Keenihan said.
"Tight gas, such as that at Warro, has not previously been economic to develop in WA, but the recent price rise in the WA domestic gas price combined with the successful application of the right technology and Alcoa's long history in supporting energy infrastructure projects has encouraged us to investigate the viability of the Warro field."
Alcoa of Australia Managing Director Alan Cransberg said this latest collaboration builds on Alcoa's long history of underpinning energy infrastructure in Western Australia.
"Western Australia is experiencing a serious shortage of gas with commercially viable supply failing to meet the State's growing demand," he said.
"Recent events have reinforced the importance of finding new energy sources.
"The time to act is now. By partnering with Latent Petroleum, Alcoa is doing its part to find solutions and create a secure energy future for the State."
Warro is a 'tight gas' field, where gas is held in tight (low permeability) sandstone reservoirs that don't naturally flow gas to surface. The rocks must be 'coaxed' through fracture stimulation to yield their gas.
Tight gas fields are very common in other parts of the world, now providing over 20% of the USA domestic gas supply.
If the same technology can be applied successfully in WA, the Warro Gas field could yield 1-3 TCF of gas for domestic use.
During the life of the field the Joint Venture could drill over 200 wells to produce an average of 100-150 million cubic feet of gas a day (approx 100-150TJ/day), which is approximately 10% of the needs of the South West.
The gas will be piped to the gas processing plant from various well pad groupings before being delivered to the 'Dampier to Bunbury' and 'Parmelia' pipelines 30km to the west where it will be sold to customers north and south along the pipelines.
If developed, the Warro Gas Project would become a major supplier of gas (over 100TJ/day), provide added security to WA's gas supply and prove the presence of a major new tight gas resource in the Perth Basin.
It will also introduce a new industry and new technology to WA; and provide employment opportunities in the Mid West region as the field activities will require continuous drilling activities over the next 20 years or more.
As part of the Joint Venture, Alcoa have agreed to fund a phased multiwell and 3D seismic program of the field in return for a 65% interest in the project.
At the conclusion of the farm-in work, Latent Petroleum will hold a 25% share in the project and TranServ Australia Limited (ASX: TSV) will hold a 10% share.
The Warro Gas Project will provide Western Australia with an alternative and new supply of gas to keep up with the increasing demand for energy for the domestic market.
