Pilot clears path to CCS with full ownership of Cliff Head JV

Pilot Energy will become the sole owner of the Cliff Head Oil Joint Venture with the company striking a deal to acquire the remaining interest in the project from partner Triangle Energy. The agreement provides a clear pathway for the Carbon Capture and Storage (CCS) development project at Cliff Head.

The deal is a win-win for both parties, firstly clearing the way for Pilot Energy (ASX:PGY) to develop its CCS project in Western Australia’s Mid West, with several advantages including enabling the company to bring in strategic partners.

Meanwhile, the agreement frees Triangle Energy (ASX:TEG) up to pursue growth opportunities in the conventional oil and gas space, including its upcoming Perth Basin exploration program.

Pilot will acquire Triangle’s 78.75% interest comprising two staged cash milestone payments of $3m (on receipt of the declaration of storage formation) and $4.5m (at issue of injection licence), and up to $7.5m worth of royalties paid to Triangle from the CCS project payable by the CCS JV partners.

Completion of the transaction is also conditional on Pilot obtaining sufficient financial security to satisfy NOPTA and Triangle that it can assume the full abandonment liability for the Cliff Head oilfield in accordance with the Offshore Petroleum and Greenhouse Gas Storage Act 2006.

The new agreement replaces a prior deal that proposed an increase in Pilot’s stake in the Cliff Head JV to 60% and the option for Triangle to either continue contributing to the JV or withdraw completely once the CCS project receives approval from the National Offshore Petroleum Titles Administrator (NOPTA), handing Pilot 100% ownership.

Pilot Chairman Brad Lingo said the acquisition of the Cliff Head facility would enable the company to effectively pursue its innovative carbon capture project together with its integrated Mid West Clean Energy Project.

“Pilot’s ambitions are being met methodically and this is yet another milestone achievement in the company’s growth strategy,” he said.

“Completion of the acquisition will enable Pilot to introduce strategically aligned partners into the project as well as financial investors to fund the proposed development.

“This will be the first offshore CCS development in the Mid West, is an important clean energy development in Western Australia and will be one of the world’s leading CCS projects.”

The new agreement is expected to be finalised by early 2024.

Triangle managing director Conrad Todd said in the interim between signature and consummation of the agreement, Triangle would continue to support the operation of the Cliff Head oil field and Pilot’s efforts to secure the transition to carbon sequestration.

What gave Pilot a head start on the CCS path was its near-exhausted Cliff Head oil field, which is the only late-life offshore reservoir located in Western Australia’s Mid West region with a Commonwealth regulatory pathway to CCS.

The company expects to be granted approval for the Cliff Head oil field to be declared a greenhouse gas storage formation in the next few months.

Late last year, Pilot and partner Triangle became the first in Australia to lodge a submission seeking regulatory approvals for an offshore CCS project under legislation that has been in place since 2006.

Since formally applying for regulatory approval, Pilot has brought in several strategic and financial partners to quickly advance the project once it gets the green light from NOPTA.

Significant Australian and international interest

Pilot has announced partnerships with Canada’s Svante Technologies – a Global Cleantech 100, Australian carbon technology developer KC8 Capture Technologies, Norway-based CO2 shipping company Knutsen NYK Carbon Carriers (KNCC) and US-based leading international full-service net-zero solutions provider 8 Rivers Capital.

The interest in the Mid West clean energy project is significant and spans the entire staged development from the CCS through to ammonia production and export.

The early deal with 8 Rivers provided the company with an option for ammonia offtake once the project reaches production.

The CCS project, which will be able to store over 1 million tonnes per annum (Mtpa) of CO2 starting in early 2026, is particularly important in that it provides a solid foundation to produce clean hydrogen and ammonia with substantial cost benefits.

The injection capacity of Cliff Head places it within the top 10 CCS projects globally.

Feasibility studies completed in March 2022 confirmed the project would be able to produce hydrogen and renewable energy at scale on a globally competitive basis.

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

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