Alcoa in Gas Deal with Empire JV

Alcoa of Australia has executed a gas supply deal with a joint venture led by Empire Oil & Gas envisaging supply of 15,000 terajoules of gas from onshore Western Australian gas projects.

The agreement would be a key to commercializing the Gingin West and Red Gully gas fields, located on EP 389 Western Australia’s onshore Perth basin, Empire said in a statement on Tuesday.

Alcoa, Western Australia's largest domestic gas consumer, has confirmed to make a staged pre-payment of US$23.8 million for the first tranche of gas from the wells while the JV would offer the US giant a fixed charge over its project assets, with recourse limited to those project assets only.

Delivery under the agreement which is subject to Alcoa getting approval of its US-based parent company within December 31, is set to begin on November 12,2012.

The gas that will feed the bauxite mines and aluminum refinery, would initially come from the new discovery wells on the permit area, Gingin West-1 and Red Gully-1, which are expected to produce between 300 barrels and 600 barrels of gas per day.

However, the company has been aiming to increase its recoverable reserves from 30 billion cubic feet of gas and 2 million barrels of condensate to 100 BCF by 2012 and between 5 million and 7 million barrels of condensate by the end of 2012.

The Wannamal and Wannamal Deep structures could provide additional gas reserves with Wannamal-1 well, to be drilled in 2012, having a potential recoverable gas of 66 billion cubic feet and 2.3 million barrels of condensate, Empire managing director Craig Marshall said.

Alcoa will be offered with any additional gas that might be found and all of this will be processed at the Red Gully Gas and Condensate Plant which includes condensate separation and storage facilities, Empire said.

Empire, the operator of the EP 389 permit area, holds 68.75% stake, while Australia-based ERM Gas has 21.25% and UK-based Wharf Resources the balance 10%