Lakes Blue Energy Outlines $605m Wombat Gas Project Development Case

Lakes Blue Energy (ASX: LKO) has opened discussions with Victorian government departments over the potential role of its Wombat gas project in supporting the state’s future domestic gas supply and firm energy requirements.

The company has prepared two briefing papers covering Wombat’s potential contribution to forecast Victorian gas shortfalls and its possible role in supporting AI and data centre infrastructure in Gippsland.

Lakes has also completed a conceptual internal development study that models Wombat as a potential $605 million post-tax net present value project with a 58% internal rate of return.

The reference case targets first gas in the March quarter of 2029, although Lakes emphasised that government discussions remain preliminary and do not constitute any agreement, endorsement, funding arrangement, or development approval.

Victorian Gas Context

Lakes has framed Wombat against Australian Energy Market Operator forecasts showing declining Victorian domestic gas production and increased reliance on imported supply over the next decade.

The Wombat project sits in the state’s Petroleum Retention Licence 2 and contains a certified 2C contingent resource of 329 billion cubic feet.

Previous independent production studies modelled potential production rates of 50 to 55 terajoules per day under certain development scenarios.

Lakes considers local gas production could support domestic supply security, along with firm power generation for future AI and data infrastructure, regional development in Gippsland, and Victoria’s broader renewable energy transition.

Conceptual Development Case

The reference case models total production of about 250 petajoules, equivalent to approximately 240Bcf of the current Wombat 2C contingent resource.

Lakes has assumed a 17-year production life, peak production of up to 55TJ per day, eight initial development wells, and 12 infill wells between 2029 and 2036.

The study estimates initial development capital of $169m, with a further $84m of infill well capital and $38m of abandonment capital expected to be funded from future revenue.

The base case uses a reference gas price of $12 per gigajoule, a 10% discount rate, 22% royalties, and a 30% corporate tax rate.

Project Payback Potential

Lakes’ modelling indicates a post-tax payback period of about 1.4 years from first gas.

The reference case also forecasts peak annual revenue of approximately $265m in 2040 on a 3% escalation basis.

The project’s economics are most sensitive to gas price and discount rate assumptions, with capital expenditure and operating expenditure having a smaller modelled impact.

Lakes has not yet established petroleum reserves for Wombat and reiterated that the production targets and financial forecasts are based on contingent resources rather than reserves.

Development Risks Remain

The conceptual case presented by Lakes depends on successful remediation of Wombat-5, future well performance, reservoir pressure and permeability assumptions, regulatory approvals, infrastructure access, and project funding.

The company plans to conduct a three-dimensional seismic survey over the Wombat structure before development drilling.

The schedule allows for Wombat-5 testing in 2026, pre-front end engineering and design work, resource certification, and FEED in 2027 before a final investment decision.

Lakes has separately prepared a paper for Development Victoria examining how Wombat could support future AI-related infrastructure opportunities, in which it considers potential integrated energy and data infrastructure developments in Gippsland, where firm electricity supply will be important for high-density data centre loads.

The company sees Wombat as a potential near-term bridge source of local dispatchable energy, with longer-term potential to complement offshore wind, storage, and transmission infrastructure.