A MODULAR gas plant, potentially earning Strike Energy more than $320,000 a day in initial cashflow from the site, is proposed under an accelerated development program for a former farm at Arrowsmith East.
The 40 terajoules (TJ) a day gas plant will sell natural gas from Strike's exploratory South Erregulla (SE) discoveries so far, beginning late next year, and will be the first component in place for its proposed Mid West Low Carbon Manufacturing Precinct.
As previously reported, the natural gas, solar and wind-powered manufacturing precinct is ultimately planned to include a granulated urea fertiliser plant which will use some of the gas as feedstock for urea production.
After its SE1 well discovered commercial quantities of good gas flowing at two levels from underlying sandstone on sheep and cropping farm Penaluna, south of Tomkins Road, Arrowsmith East, Strike purchased the 3500 hectare property for a reported $13.5 million last June.
Members of the Morgan family, who took up the land as bush blocks when it was opened up for farming in the mid 1960s, moved off the property in February after selling their farming equipment at a clearing sale covered at the time in Farm Weekly.
According to a Strike statement to the Australian Securities Exchange last Thursday, the initial plant to produce saleable gas from its existing independently-certified 128 petajoules (PJ) reserves is "phase one" of a three-phase program under its "gas acceleration strategy".
Phase two will be adding additional "expansion modules" to the plant to double its capacity to better than 80TJ worth of gas a day after further planned "appraisal drilling" confirms 271PJ of expected gas reserves, Strike said.
Phase three is "deployment" of an additional carbon dioxide (CO2) "purification and compression module" to support development of the Mid West Low Carbon Manufacturing Precinct's carbon capture and sequestration capabilities.
READ MORE:
It will also include integration of the precinct's planned "substantial wind and solar power resources", Strike said.
It said work to support phase three started last week with weather data gathering equipment on site to determine "optimal wind and solar energy capacity", as well as layout of the precinct for future installation of wind turbines and solar panels.
Renewable energy will be used for sequestration and compression (forcing CO2 underground) and general power requirements of the expanded gas plant.
Strike said it has also commissioned consultant RISC Advisory to review potential CO2 storage capacity of the sandstone reservoirs it discovered during the initial SE drilling.
It said it had submitted its production licence, field management plan and primary environmental referral applications for phase one.
Pre-FID (final investment decision) gas marketing activities had resulted in "proposals for firm gas supply" at greater than $8/GJ, Strike said.
The company is preparing to drill three new appraisal wells between 4000 and 5000 metres deep at Arrowsmith East starting in July - two will be to the west of SE1 to reach the deeper Kingia sandstone and an easterly well will be into the shallower Wagina sandstone.
Strike said the modular design of the gas plant, with 80 per cent of the phase one stage built off site as assembly units small enough to be transported from Kwinana or Geraldton as piloted semi-trailer loads, would speed up construction.
This will help mitigate construction risks of "substantial delays and cost overruns associated with complicated supply chains, labour rates, trade availability and accommodation shortages" observed at other energy and mining projects in the region, it said.
Strike has been working with Technip Energies on initial engineering for the gas plant.
Staged expansion of the modular plant during later phases of development will allow it to quickly respond to market demands, as well as adapt to changes in the "Western Australian regulatory environment" and the "evolving Federal (domestic gas supply) safeguard mechanism", Strike said.
"Preparing South Erregulla for its final investment decision will lock in Strike's second source of gas production as part of its gas acceleration objectives, said Strike managing director and chief executive officer Stuart Nicholls.
"This innovative development plan will allow Strike to proceed with a greater degree of speed and certainty than it would if it proceeded with a traditional large-scale, stick-built piece of infrastructure.
"As gas prices rise in the State, the proposed phase one 40TJ/d development at Strike's 100pc owned South Erregulla gas field has the potential to generate a substantial cashflow for the company once online."
As previously reported in Farm Weekly in February, a $136m windfall cash injection courtesy of Gina Rinehart's Hancock Energy Pty Ltd, allowed Strike to review and accelerate plans for gas production, Mid West Low Carbon Manufacturing Precinct and Project Haber urea production around its SE1 well at Arrowsmith East.
In an off-market share deal, Hancock Engineering paid Strike 36c each for the 377,040,765 shares it held or controlled in former joint venture partner Warrego Energy.
Hancock Engineering has replaced Warrego as Strike's 50/50 partner in developing the West Erregulla gas project on the north side of Tomkins Rd, Arrowsmith East, near Strike's wholly-owned SE project.
Strike is seeking complementary partners to help it develop its low carbon manufacturing precinct.
It is proposing Project Haber and other low-carbon industries, solar and wind farms and possibly agricultural research facilities be developed on the northern half of the Arrowsmith East property, while the southern portion of the property be planted out as a tree farm to help offset emissions.
Woodside Energy is developing a neighbouring Tompkins Road property as a carbon sink tree farm.
