Strike Energy and Warrego Energy have signed a binding heads of agreement to jointly develop the West Erregulla gas field in the Perth Basin.
The HOA ensures both companies are aligned on phase one development of West Erregulla, which includes gas processing and increased plant capacity, as well as the current drilling campaign at the West Erregulla-3 appraisal well.
Warrego raised $15 million earlier this year to fund the drilling program at WE-3.
The JV has agreed to a significant increase in plant capacity during phase one, from 50 terajoules (TJ) of gas per day to 80TJ/day, which will be delivered to the Dampier-Bunbury natural gas pipeline.
That $200 million facility will be one of the largest onshore gas facilities in Western Australia.
Warrego chief executive David Biggs said a single processing plant would provide operational efficiencies to both companies, as well as a smaller operational footprint.
A final investment decision (FID) for West Erregulla's phase one development is expected by April next year, with first gas delivery targeted for mid-2022.
The JV has also entered into a gas balancing arrangement to align the interests of both companies with respect to the difference in total contracted volumes and contract start dates for each gas sales agreement.
Strike managing director Stuart Nicholls said a fully aligned way forward would lead to a more competitive outcome across all facets of the project.
"This agreement with our JV partner provides greater certainty for the phase one project development," he said.
“We look forward to implementing our new agreement and preparing for the joint FID early next year."
Shares in Strike were down 1 per cent at 1:30pm AEDT to trade at 27 cents, while Warrego shares were up 4 per cent to trade at 25 cents.
Each company holds a 50 per cent interest in West Erregulla.
Strike is also developing its Walyering gas field in the Perth Basin alongside Sydney-based Talon Petroleum.
Other companies developing gas fields in the Perth Basin include Beach Energy and Japan’s Mitsui & Co, which own the Waitsia JV.