Pilot and Triangle interests align on Mid-West WA energy projects

Special Report: Pilot Energy’s plans to develop a large-scale renewable energy project utilising established oil and gas infrastructure in Western Australia’s Mid-West are gathering steam following a two-pronged deal with Perth Basin oil producer Triangle Energy.

Pilot (ASX:PGY) announced today that Triangle would acquire a 78.75% interest and operatorship of its WA-481-P exploration permit, which covers 8,600km² of the offshore Perth Basin, in exchange for $300,000 in cash and a $1.2 million free-carry through to completion of a three-year minimum work program on the permit requiring $5.5 million in expenditure.

The deal aligns ownership of WA-481-P with that of the Cliff Head Oil Field, where Triangle owns 78.75% and is operator and Pilot is soon to assume an indirect 21.25% interest through its proposed acquisition of Royal Energy, owner of a 50% interest in the Cliff Head JV operating company, Triangle Energy (Operations) Pty Ltd.

In parallel with the purchase of the majority interest in WA-481-P, Triangle has agreed to join Pilot in pursuing the development of an offshore wind and onshore wind and solar power project centred around the Cliff Head offshore production facilities and the onshore Arrowsmith separation and processing facilities.

Under the terms of the agreement, Pilot will hold an 80% interest and operate the wind and solar joint venture, with Triangle holding the balance. The two parties will also negotiate access to the Cliff Head infrastructure for the joint venture, while Pilot will carry Triangle for the costs of conducting feasibility studies on the project.

“Together with the position we are securing in the Cliff Head Oil Field through the acquisition of Royal Energy, the formation of the upstream and wind joint ventures with Triangle Energy, the only established offshore production operator in the Perth Basin and the Mid-West Region of WA, presents the perfect opportunity to develop a major renewable energy transition project for Australia,” Pilot chairman Brad Lingo said.

“This is exactly the type of development that demonstrates the ability to substantially redefine how the Australian offshore oil and gas industry can, in parallel with existing operations, participate in a low carbon future through offshore renewable energy projects delivering substantial low cost energy to WA.”

Common approach in Europe

While offshore wind farms are not yet commonplace in Australia, Europe’s North and Baltic seas are home to many that have been tied in to existing oil and gas infrastructure.

Provided it is feasible, being able to reconfigure existing oil and gas facilities to also support renewables can save significantly on upfront capital for wind and solar farms and help to extend the operational lifespan of the infrastructure.

For an offshore wind farm of the scale proposed for the Mid West Wind and Solar Project, the cost of a new-build offshore electrical substation platform facility is estimated at A$150 million based on comparable UK North Sea Project.

Not only does the potential integration of the Mid West Wind and Solar Project into the Cliff Head Alpha Platform present a compelling cost saving, the partners can potentially use all the historical offshore technical and environmental work completed on the Cliff Head Oil Field to accelerate the feasibility and scoping for the offshore wind project.

In a consulting role prior to joining Pilot, Lingo completed a comprehensive assessment of Australian oil and gas assets suitable for repurposing for renewable energy projects, in which he identified Cliff Head to be one of the standouts.

Among the reasons it ranked so highly were the fact that it is in an area with the most highly rated offshore wind resource in the country (annual mean wind speed greater than 9-10 metres per second) and water depths in the production licence and the surrounding WA-481-P permit were ideal at 20-50m.

Cliff Head has produced 14.8 million barrels of oil since starting up in May 2006 and currently produces ~600 barrels of oil per day. Ongoing workovers on Cliff Head 6 and 7 wells are forecast to restore production to 1000 barrels of oil per day.

Plenty of potential in WA-481

In looking to extend the useful life of the Cliff Head infrastructure, Pilot and Triangle are not just banking on the success of the wind and solar project.

WA-481-P contains numerous leads and prospects within close proximity of the Cliff Head A production platform estimated to have prospective resources of 215 million barrels of oil (best estimate) and 45 billion cubic feet of gas (best estimate), according to an independent assessment by RISC.

Triangle has agreed that the work programme to be conducted in the permit will be directed in the area covering those leads and prospects.

Crude oil from Cliff Head is currently sent to BP’s Kwinana refinery near Perth, which is supposedly set to close within six months and convert into an import terminal, for processing.

Triangle is yet to receive a formal notice of termination under the supply agreement in place with BP and Lingo is not concerned that they might struggle to find buyers for the crude. But he said the episode underscored the benefit of getting on board with the wind and solar project.

This story was developed in collaboration with Pilot Energy, a Stockhead advertiser at the time of publishing.

This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.