Natural gas seller Energy World has been handed a $2 million grant from the federal government to fast-track the restart of its gas operations in Queensland.

Energy World (ASX:EWC) mothballed its Eromanga and Gilmore gas operations in 2001 due to a slump in the gas price and its offtake partner going bankrupt.

But a power crunch on the east coast that resulted in a series of blackouts last year has prompted state and federal governments to take action to fast-track new supply into the market.

“The East Coast gas supply shortfall issues and the resultant significant increase in gas prices has created and excellent opportunity for recommissioning of our gas fields,” director Brian Allen told investors.

The federal government’s “Gas Acceleration Program” will provide financial assistance to companies that can begin producing gas by June 2020, but Energy World says it will do it more quickly.

“We’d expect to be able to do it in about a year,” Stuart Wilson, head of corporate finance for parent company Energy World International told Stockhead.

“I think most importantly for us is that given we already have these existing processing plants, the substantial majority of capital has already been spent on the projects.

“So the incremental cost to get these going is very low and therefore any gas price, even if it’s not as high as it is now, will make these very profitable projects.”

The Eromanga and Gilmore gas fields, which are located in South West Queensland, host a resource of 31 billion cubic feet of gas.

Energy World has also recently acquired the remaining 80.4 per cent share of the Thylungra field, which it says can be tied into the Eromanga processing plant and has potential additional reserves from the two previously drilled discovery wells.

Energy World (ASX:EWC) shares over the past year.
Energy World (ASX:EWC) shares over the past year.

The company’s processing facilities have a throughput capacity of 12 terajoules of gas per day, allowing it to produce up to 24 terajoules per day when fully utilised.

Both facilities are connected to existing gas production wells and the broader Queensland gas pipeline infrastructure.

Energy World commissioned an independent report to assess both gas processing plants.

The report concluded that the plants were in reasonably good condition and while some work was required, there were no apparent impediments or significant “show stoppers” to proceeding with a plan to restart the plants, Energy World said.

The company will receive an upfront payment of $500,000 followed by a reimbursement of 50 per cent of the amount it spends, after the first $1 million of expenditure.

Energy World now plans to re-establish vehicle access to the wells, pipelines and processing plant at Eromanga.

Third party interest

Mr Wilson believes Energy World’s plants are the only ones in Queensland that are not controlled by heavyweight Santos.

“Therefore, when you think about how you develop it and third parties using it, it gives people another angle other than just talking to Santos,” he said.

“There’s the ability to unlock third party gas resources through the Eromanga plant.”

Energy World has already been in talks with interested parties.