Triangle Energy explores potential for WA renewable fuel refinery, reduces decommissioning cost estimate for Cliff Head

Triangle Energy ASX TEG Cliff Head oil FEED renewable fuel refinery decommissioning cost Western Australia
Triangle Energy has commenced a FEED study for a renewable fuel refinery to process bio-crude feedstock, crude and condensate from its Cliff Head operations.

Perth Basin oil producer Triangle Energy (ASX: TEG) has launched a front-end engineering design (FEED) study to investigate the potential to establish a modular, flexible feed renewable fuel refinery in Western Australia’s Mid-West.

If successful, it could be the first co-processing renewable fuel refining project in Australia.

This FEED phase follows positive outcomes resulting from the completion of earlier concept and pre-FEED studies. It proposes a 5,000 barrels-per-day capacity facility to process bio-crude fuel stocks, as well as crude and condensate products from the company’s Cliff Head joint venture in the Perth Basin and other onshore and offshore operations in the state.

The study has begun immediately and is expected to be completed by the first quarter of the 2022 calendar year.

The proposed project would be located adjacent to the Arrowsmith separation plant south of Dongara in WA. First production is currently targeted for the first quarter of 2024.

In a separate announcement, Triangle also revealed a reduced decommissioning cost estimate for its Cliff Head assets from $39.5 million to $28.7 million.

Renewable diesel refining experts selected as preferred FEED contractor

Triangle said it has engaged Plant Process Group to undertake the FEED work due to its extensive experience in the delivery of modern, modular renewable diesel refining capacity in North America.

“The application of unique catalyst refining technology will be the first deployment of co-processing renewable fuel refining in Australia,” Triangle stated.

The proposed project aims to respond to growing demand from the mining and heavy transport sectors by delivering both renewable diesel and renewable marine fuel for the WA market.

Fuel security for WA and potential future hydrogen consumer

The renewable fuel refinery project was initiated earlier this year to respond to decarbonisation targets and increased demand for local future fuel supply.

The establishment of Triangle’s project is expected to provide future flexibility and fuel security following the planned closure of the BP Kwinana refinery (WA’s only oil refinery) and conversion to a fuel import terminal.

It will also be a net consumer of hydrogen with up to 1,500 kilograms used per day in the processing of fuel.

This is forecast to provide key local demand to further enhance the production of hydrogen in WA as well as assist in the overall transition to greener fuels.

“The facility will also be a potential future consumer of hydrogen and have important benefits for Western Australia’s fuel security after the planned closure of the Kwinana refinery later this decade,” Triangle managing director and chief executive officer Rob Towner said.

“I look forward to sharing further details of Triangle Energy’s exciting diversification and energy transition strategy in the coming months,” he added.

The company’s existing diversification steps include the Pilot Energy (ASX: PGY) joint venture and its holding in State Gas (ASX: GAS).

Reduced decommissioning cost estimate

Triangle today also announced the completion of an updated decommissioning cost estimate for the Cliff Head Alpha and related infrastructure.

In contrast to an initial estimate by Elemental Group of $39.5 million, a detailed review by Austex has resulted in a $10.8 million decrease to $28.7 million due to realising the value of recycled materials from the decommissioning process.

The new estimate costed the same strategic outcomes as previous studies, which involves a sustainable solution for the removal and remediation of the onshore Arrowsmith separation plant and associated facility. Costs also consider conducting well plug and abandonment operations using a fit-for-purpose hydraulic workover unit compared to a more costly traditional jack-up rig.

With the availability of a 40% Petroleum Resource Rent Tax (PRRT) benefit for closing down expenditures, the theoretical net decommissioning cost to the Cliff Head joint venture is only about $17.2 million (before income tax).

Although this significantly reduced estimate is a positive result, Mr Towner reiterated that the joint venture is not planning on decommissioning the Cliff Head assets at any time in the near future.

“At present, the focus is well development, and we are actively pursuing the expansion of the Cliff Head Alpha production and drilling two development wells, Western Development and South-east Nose, which could extend the field life to the late 2020s based on the announced contingent resources and the Mentelle exploration well,” he said.

“These three wells can be drilled from Cliff Head Alpha platform and tie-in for near-term production.”

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