Oil and gas junior Armour Energy (ASX: AJQ) has started selling gas to the spot market as production from its Kincora project in Queensland surpasses contractual obligations.
The company today revealed it was currently selling 11 terajoules per day of gas from the project, with 10TJ/day going to gas major Origin Energy’s (ASX: ORG) 37.5%-owned business Australia Pacific LNG under an existing gas sales agreement.
According to Armour, the remaining 1TJ/day is currently being sold into the spot market at “significantly higher prices” than under the Australia Pacific LNG contract.
“This is a significant achievement for Armour for two reasons: the company’s production rates are now fully satisfying the agreement with APLNG; and the company has commenced selling into the broader Queensland gas market,” Armour chief executive officer Roger Cressey said.
“With this milestone, Armour continues to demonstrate its commitment to increase production and gas supplies into the eastern Australian domestic gas market,” Mr Cressey added.
The boost in output follows recent maintenance work at the Kincora gas plant, with production coming from existing gas wells plus some drawn from the Newstead storage facility.
Armour is hoping to maximise returns during the current summer peak period, when gas demand and prices typically spike, targeting sales of up to 15TJ/day.
Kincora growth strategy
The Kincora project is located on the Roma Shelf of Queensland’s Bowen-Surat Basin.
It comprises petroleum tenements and production and transportation infrastructure, including the Kincora gas and liquefied petroleum gas (LPG) plant, which began first commercial gas sales in October 2017.
Armour acquired the initial acreage from Origin (APLNG’s parent company) in September 2016 and has been awarded additional acreage nearby throughout 2018.
The most recent acquisition was last month’s award of three exploration blocks now making up Armour’s Roma Shelf project, and which lie in proximity to the Kincora production facilities.
Armour is currently in the third phase of its growth strategy, which involves the drilling of new wells and evaluating potential workovers and stimulations of existing wells.
During this phase, the company is aiming to increase gas production from Kincora to 20TJ/day.