Oil and gas junior Central Petroleum (ASX: CTP) is working on bringing its Northern Territory gas to the east coast, having inked a gas sales deal with Australian fertiliser supplier Incitec Pivot.
Under the agreement, Central will deliver at least 20 terajoules per day of gas to Incitec on an ex-field basis from its Mereenie and Palm Valley gas fields.
The gas will be delivered via the Northern Gas Pipeline as soon as it begins commercial operations (currently anticipated in December 2018) until the end of December 2019.
Central said it is also in talks with pipeline operator APA Group to upgrade the Mereenie-to-Amadeus Gas Pipeline lateral, which could give Incitec the option to increase its volume.
The natural gas explorer is already partnered up with Incitec under a separate 50:50 joint venture deal announced back in March. This partnership involves the development of a natural gas project in Queensland’s Surat Basin to support the long-term viability of Incitec’s Gibson Island fertiliser facility.
Under the joint venture arrangement, Incitec will contribute up to A$20 million for appraisal drilling costs during the initial exploration period.
First gas production from the Queensland project is not anticipated until around 2022 (subject to the confirmation of proven reserves and further development of the acreage), hence the need for an earlier gas supply arrangement.
Central managing director Richard Cottee said the sale of the Mereenie and Palm Valley gas into the eastern seaboard to Incitec demonstrated the importance of NT gas to the domestic market.
“It is particularly noteworthy that this gas is being used to keep open an existing fertiliser plant – an essential input in the production of food – and preserving the existing employment of many Australian workers,” he said.
As a result of the gas sales agreement, Cottee said the company would also reopen its shut-in Palm Valley field, opening up further local employment opportunities.
Also in March, Central announced it and 50:50 joint venture partner Macquarie Group had been given the green light to develop the Mereenie gas project in the Northern Territory’s Amadeus Basin.
The development includes the drilling of one well, West Mereenie-26 which spudded in May, and a A$12 million upgrade of the processing plant to target a new capacity of 63TJ of gas per day.
Central opened this week with a second announcement, declaring its West Mereenie-26 well had reached the targeted Lower Stairway 2 sandstone. This was confirmed by cutting samples and logging.
The horizontal section of the well now extends 425m and is in the interval expected to be the most highly fractured.
According to Central, minor gas shows and connection gas have been observed, although there is evidence of fracture plugging with minerals.
Horizontal drilling is ongoing, with the completion design of the well to be evaluated at the end of this segment (i.e. whether the hole will be left open, cased or fracture stimulated).
Shares in Central Petroleum were up 1.25% to A$0.162 on the double announcement by midday trade.
The company’s share price has increased by more than 37% over the past three months since announcing its initial joint venture partnership with Incitec.