Oil and gas producer Triangle Energy (ASX: TEG) and junior explorer Pilot Energy (ASX: PGY) (together forming the Cliff Head joint venture, or CHJV) have signed a binding offtake agreement with BP Singapore in relation to crude oil production from the Cliff Head field in the Perth Basin, about 12 kilometres off the Western Australian coastline.
Under the terms of the agreement, BP Singapore will purchase 100% of the crude produced from Cliff Head, commingled with crude and condensate from other producers and shipped free-on-board from the BP Kwinana refinery, south of Perth.
As operator of the CHJV, Triangle will also act as operating agent on behalf of the designated seller groups (DSGs) in relation to their own offtake agreements.
The company has entered into an agreement with each of the DSGs to govern the provision of these services.
The DSGs, in turn, have each entered into agreements with BP Kwinana for the lease of storage tanks for their portions of the commingled product.
Triangle managing director Robert Towner said the offtake agreement provides the CHJV with certainty regarding near-term oil production.
“The Cliff Head oilfield and its significant infrastructure is now capable of continuing to take oil to the market, as well as providing the base upon which further exploration and development success in the permit areas may be exploited,” he said.
Operating in tandem
Mr Towner confirmed the new offtake agreement will operate in tandem with an already-executed product storage and services agreement with BP Kwinana, and the initial duration will align with existing terms.
Pricing for the crude oil offtake will be at a fixed discount to Brent crude benchmarks.
BP Singapore has been granted a right to match any offers for Cliff Head product sold on a standalone basis for up to three years following the delivery period.
Based on current storage levels, the CHJV partners expect the first lifting will take place this month.
First commercial oil discovery
The Cliff Head project is comprised of a production licence over 72 square kilometres and an oilfield over 6sq km of the offshore Perth Basin.
It was the first commercial oil discovery in the basin and was developed at a cost of $327 million, with first production commencing in May 2006.
Cliff Head draws oil from three horizontal and two deviated production wells and the crude oil is carried via a 14km pipeline to an onshore stabilisation processing plant at Arrowsmith, near the town of Dongara, before being trucked to BP’s Kwinana refinery.
The project’s facilities are the only offshore infrastructure in the Perth Basin and have been deemed important for new developments in the surrounding area.