Natural gas exploration junior Central Petroleum (ASX: CTP) and its larger 50/50 joint venture partner, financial major Macquarie Group, have been given the green light to develop the Mereenie gas project in Australia’s Northern Territory.
Central Petroleum today announced the wholly-owned subsidiaries of the joint venture partners had agreed and signed an Authorities for Expenditure to confirm the drilling of one well and an immediate A$12 million upgrade of the processing plant.
This decision to go ahead with the development follows last week’s interim approval of joint marketing arrangements by the Australian Competition and Consumer Commission (ACCC).
The Mereenie partners had submitted the application last year, hoping the development would coincide with the Northern Gas Pipeline (NGP) becoming operational. However, it was delayed and ultimately approved on more restrictive terms than expected.
As a result, the partners have agreed to drill only one well instead of the two it had planned, with the funds earmarked for the second well now going towards the plant upgrade.
“Ideally, the plant upgrade decision should have been made in February to ensure the work was completed by the time the NGP became operational,” Central Petroleum managing director Richard Cottee said.
The NGP is a 622km pipeline that will link Tennant Creek in the Northern Territory with Mount Isa in Queensland. It is expected to be operational by December this year with an initial capacity of 90 terajoules per day, of which about 32TJ per day has been contracted.
The Mereenie plant upgrade is targeting an increased capacity from its current 25TJ per day to a new level of 63TJ per day.
At the new capacity, 58TJ per day can be sold as gas without adversely affecting current crude oil production, Central Petroleum stated.
“While it will be tight, Central, as operator, will use every endeavour to ensure the Mereenie processing plant has the capacity to sell 58TJ per day of sales gas by the end of this year,” Cottee said.
The Mereenie gas project comprises two oil leases covering a total of 281sq km in the Northern Territory’s Amadeus Basin.
Central Petroleum assumed operatorship of the project in September 2015 when it acquired a 50% stake from Australian gas major Santos. Macquarie Group became Central Petroleum’s non-operating joint venture partner in January 2017 after acquiring Santos’ remaining 50% equity
Central Petroleum’s share price had increased by 4.3% to $0.12 a share on the news by afternoon trade on Monday.