Equus deal targets domgas supplies

A newly established company led by a group of Perth oil and gas executives aims to become a major supplier to the domestic gas market after buying the offshore Equus gas fields from US company Hess Corporation.

The surprise deal increases the likelihood Western Australian industry will have plentiful supplies of gas for many years to come, in contrast to the gas supply crisis on the east coast.

Hess had previously sought to develop Equus as a supplier to export-focused liquefied natural gas (LNG) projects, but was unable to complete a deal with Woodside Petroleum.

New owner Western Gas will focus on opportunities in the domestic market, with executive director Andrew Leibovitch targeting 2022 for first supplies.

He cited projections by the Australian Energy Market Operator suggesting there was a risk of a supply shortfall after 2021 without new investment.

Mr Leibovitch said the Equus gas project was development-ready, with exploration and appraisal already completed and engineering activities at an advanced stage.

The project has a resource of more than 2 trillion cubic feet (2 Tcf), enough to supply one quarter of WA's domestic gas demand for more than 20 years.

“Equus provides a great opportunity for the timely development of Western Australia’s discovered gas reserves to meet the needs of local gas customers, particularly when the eastern states of Australia are experiencing a major energy crisis and exploration is in decline,” Mr Leibovitch said.

Mr Leibovitch and fellow executive director Will Barker are also co-founders of Goshawk Energy, which last year established an onshore gas exploration joint venture with the Andrew Forrest-backed Squadron Resources.

Mr Forrest’s company Fortescue Metals Group has been a strong advocate for increased domgas supplies, and Mr Leibovitch said it could be a potential customer.

However, he said there were no agreements with Mr Forrest or Fortescue.  

Western Gas did not disclose the value of the deal, which comes nearly a year after Hess wrote-down the value of its Equus assets.

Its its December quarter 2016 report, it included a $US938 million pre-tax charge to fully impair the carrying value of its Equus assets following the decision to defer development.

The assets include four permits and a retention lease, comprising 11 gas and condensate fields.

Western Gas believes proximity to infrastructure, including production facilities and pipelines, boosts the prospects of development.

The dispersed location of the fields and their distance offshore (about 200km) will add to their development cost.