Pilot Energy makes headlines as first in Australia to formally seek approvals for offshore CCS project

Pilot Energy and partner Triangle Energy have notched the major milestone of becoming 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.

At the same time, the JV partners also discovered they can actually store 50% more carbon dioxide than originally expected in the Cliff Head Oil Field in Western Australia’s Mid West.

Pilot Energy (ASX:PGY) and Triangle Energy (ASX:TEG) have this week successfully lodged their application to the National Offshore Petroleum Titles Administrator (NOPTA) to have Cliff Head declared as an identified greenhouse gas storage formation.

The submission was the first to be made under the Offshore Petroleum and Greenhouse Gas Storage Act 2006 and the Offshore Petroleum and Greenhouse Gas Storage (Greenhouse Gas Injection and Storage) Regulations 2011.

A requirement of the application was a conservative assessment of the CO₂ storage potential across the WA-31-L tenement area, which was undertaken by adviser CO2Tech.

This work resulted in an upwards revision of the 2C contingent CO₂storage resource estimate from 6.4 million tonnes to 9.7 million tonnes.

The 2C resource, which is the best estimate of contingent resources, was originally estimated to enable CO₂injection at a rate of 500,000 tonnes per annum (tpa) for around 13 years.

But with the 50% increase in storage capacity, the JV partners can now inject CO₂ at a rate of 665,000tpa for about 15 years.

The Cliff Head CCS project has substantial estimated storage potential of up to 50 million tonnes.

The stage one project in Western Australia’s Mid West would provide carbon capture and storage (CCS) services to third parties and support the subsequent production of blue hydrogen and ammonia.

Greater storage capacity will also mean increased revenue potential, which in earlier feasibility studies was estimated at around $20m each year.

The increase in storage would require a new CO₂ injection well to be drilled downdip of the oil field instead of converting the five existing wells, but Pilot and Triangle are not expecting this cost any extra.

“The capital cost of the simplified development plan is under review, however it is expected to fall within the previous guidance of $110 million for 665,000 tonnes per annum injection capacity with up to a further $60 million to expand injection capacity to 1.1 million tonnes per annum,” the JV partners explained.

The five existing wells would be retained for pressure maintenance and monitoring.

Pilot and Triangle are much further down the track towards bringing Australia’s first offshore CCS project into operation than the rest.

Over the past six months, the Cliff Head JV technical teams, along with CO2Tech have undertaken a full technical assessment of the CO2 storage potential across the WA 31-L tenement area.

The work expanded key technical models to cover the entire WA 31-L tenement and adjacent area, expanding into Pilot’s 100% held WA 481-P exploration licence.

The Cliff Head Oil Field is the only late-life offshore reservoir located in the WA Mid-West region with a Commonwealth regulatory pathway to CCS.

In both Australia and overseas, there are very few CCS projects in the pipeline and the ones on the agenda are targeted to be in operation closer to 2030.

The Cliff Head CCS project, however, is scheduled to be capturing and storing CO2 by 2025/2026.

Majors knocking down the door

This has prompted strong interest from major domestic and international players with big names in Australia, Japan and South Korea realising they don’t have a near-term CCS solution to support their blue hydrogen and ammonia offtake ambitions.

The significant progress has also attracted new sophisticated and institutional investors keen to chip in $2m via a placement of 133.3 million shares at 1.5c each.

This would provide Pilot with sufficient funding to complete regulatory approval for the Cliff Head CCS project as well as begin hydrogen pre-front-end engineering design (FEED) for the Mid West Clean Energy Project.

Following the declaration of Cliff Head as a greenhouse gas storage formation, Pilot and Triangle will complete all steps, including all regulatory submissions and FEED, to enable a final investment decision on the CCS project.

Granting of the declaration will trigger the restructure of the Cliff Head JV, resulting in Pilot

holding a 60% direct operated participating interest in both the CHJV (oil project) and the CH CCS project, and Triangle Energy holding a 40% direct participating interest in both projects.

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.