Pilot Energy (ASX:PGY) has reached an agreement on indicative farm-in terms that will see Advanced Energy Transition fully fund the drilling of a gas exploration well at its South Perth permits.

Under the agreement, AET will drill and fully fund the well to test the Leschenault gas prospect to earn a 50% interest in the project, which has been assessed to host a best estimate prospective resource of 725 billion cubic feet of gas in the Permian Sue Group sandstones and shallower Triassic age Leseur sandstones.

While this is undoubtably positive for Pilot, there is more.

Firstly, the proposed well will also test the suitability of the Leseur sandstone reservoirs for carbon sequestration.

Additionally, the company’s EP 416 and EP 480 exploration permits overlie the area of the Western Australian government-sponsored South West Hub Carbon Capture & Storage Project.

Taken together, this means that even in the event that no gas is found at Leschenault, the Leseur sandstone could still serve as a CCS reservoir.

That AET is also required to case and suspend the well as a potential carbon sequestration appraisal injection well and to negotiate and agree on whether to proceed with a CCS assessment.

“The transaction with AET is absolutely aligned with Pilot’s business plan of leveraging off its existing oil & gas assets and diversifying into new competitive energy production streams,” executive chairman Brad Lingo said.

“The development of carbon capture and storage at our existing gas permits complements the expansion of our footprint in the South West Western Australia energy market and can form the core of a significant blue hydrogen and CCS project for South West Western Australia.”

Leschenault gas prospect

Leschenault is a large faulted anticlinal structure that straddles both EP 416 and EP 480, which have a combined area of 2310sqkm.

This area has only been sparsely explored with just two wells drilled in the 1960s and the GSWA Harvey 1 to 4 wells that were drilled by the WA government as part of the carbon sequestration study.

Notably, this limited drilling has confirmed the presence of a Permian petroleum system with gas sourced from the proven Sue Coal Measures.

Additionally, the permits are just 100km from the Kwinana, Pinjarra and Wagerup industrial areas, providing potential sources of carbon emissions for the CCS portion of the project.

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