Australian oil and gas junior Key Petroleum (ASX: KEY) has inked a deal with Santos (ASX: STO) and Beach Energy (ASX: BPT) to link its wholly-owned Tanbar gas project to the majors’ Cooper Basin gas gathering network.
The companies today announced the execution of a non-binding memorandum of understanding (MoU) that proposes terms for connecting and transporting Key’s Tanbar gas from Queensland into the network to be processed at the Santos-operated Moomba facility in South Australia.
The MoU forms the basis for the negotiation of a future formal processing and transportation agreement to allow raw gas from Tanbar to be processed into sales gas to supply to the Australian east coast gas market.
While the commercial terms of the deal remain confidential, Key said its board is pleased with the MoU terms.
“This MoU demonstrates a clear pathway to commercialisation of future gas discoveries within our Tanbar gas project, subject to final binding terms being agreed,” Key managing director Kane Marshall said.
“Importantly, there is flexibility for financing of future developments whereby capex-intensive gas processing infrastructure may not be required if it can be processed and transported via Santos-operated infrastructure in the manner contemplated by this MoU,” he added.
Tanbar gas project
Key’s 100%-owned south-west Queensland permit ATP 924, containing the Tanbar gas project, has been estimated to contain current gross unrisked prospective resources of 500 billion cubic feet of gas (best estimate).
The company’s recently revised work program at ATP 924 is predominantly focused on Triassic and Permian reservoir targets, which lie 20km west of Santos’ Mount Howitt and Whanto gas developments, and 75km west of Real Energy’s (ASX: RLE) recently successful Tamarama-2 and Tamarama-3 pilot wells.
Key is planning to drill two prospects in the project area, Alfajour and Taj.
Alfajour has a gross prospective resource of 71Bcf of gas and 2.76 million barrels of oil (best estimate).
Taj’s best estimate gross prospective resource has been estimated at 63.9Bcf gas and 13.25MMbbls oil.
In its December quarter report released in January, the company said it had scheduled the commencement of well site preparations for February.
Key shares jumped 50% on the news to reach $0.009 by early afternoon trade.