Pilot Energy and Triangle Energy have struck a deal to re-align their interests in the Cliff Head JV which will allow the pair to charge ahead with a proposed carbon capture and storage (CCS) project in WA’s Mid-West.

Pilot Energy (ASX:PGY) and Triangle Energy (ASX:TEG) have agreed a new deal that will see the restructuring of the existing JV arrangements for the Cliff Head (CH) Oil Field and proposed CCS project.

The significance of this restructure is that it provides a clear development pathway for the CCS project, which will be the first offshore CCS development in Mid-West WA and one of the first CCS projects to be implemented in Australia.

A recent feasibility study estimated the Cliff Head Oil Field production licence (WA-31-L) area had CCS potential of 6.4 million tonnes of CO2 (2C contingent resource) at an injection rate of 500,000 tonnes per annum (tpa).

WA-31-L has an upside CO2 storage capacity of about 15.8 million tonnes (3C contingent resource).

The Greater Cliff Head Area extending into WA-481-P has an additional 4.4 million tonnes (2C contingent resource) and a further 56 million tonnes of CO2 storage capacity (prospective resource best estimate) in the area immediately adjacent to Cliff Head.

“Re-alignment of the CHJV interest between Pilot and Triangle is a significant step in the development pathway for the first offshore CCS project in the Mid-West WA and for the future re-tasking of the Cliff Head infrastructure,” Pilot Energy executive chairman Brad Lingo said.

“Declaration of the CCS resource is an important near-term milestone for the progression of the CH CCS project and will provide sufficient confidence to unlock further investment in the development project.”

The binding Cliff Head re-alignment term sheet paves the way for Pilot and Triangle to
progress an application to the National Offshore Petroleum Titles Administrator (NOPTA) to
have the Cliff Head Oil Field reservoir declared a Greenhouse Gas Storage formation.

Pilot and Triangle will apply for a licence allowing them to inject a minimum of 500,000 tonnes of CO2 per annum into the Cliff Head Oil Field reservoir for permanent sequestration.

Once the licence is granted and economic oil production at Cliff Head has finished the partners can move ahead with the CCS project.

Life after oil

Triangle Energy managing director Conrad Todd said the restructure provided an exciting and profitable use for the Cliff Head facilities once the oil field reached the end of its economic life.

“Our co-operative joint venture will both reduce Triangle’s abandonment liability and defer it for at least 10 years after oil production,” he noted.

“We are especially pleased that the CHJV will at the same time be making a significant contribution to the reduction to the carbon dioxide emissions in Western Australia.”

The key specifics of the deal include an increase in Pilot’s direct interest to 57.5% in both the Cliff Head oil and CCS projects, with Triangle holding the remaining 42.5% direct interest in both projects.

Pilot currently holds a 21.25% indirect interest in the Cliff Head Oil Field JV.

Pilot will also become the operator of both the CHJV and the CH CCS JV, although Triangle
will continue technical operatorship of the CHJV through its oil production life.

Australian carbon credits on the rise

The Australian government incentivises project developers to do their bit to help remove carbon dioxide from the atmosphere by issuing Australian Carbon Credit Units.

And these units are going up in price, making it even more attractive for project developers.

“Over the last 18 months, the Australian Carbon Credit Unit (ACCU) price has significantly increased, reaching in January of this year a peak forward contract price of $60 per tonne (Feb 2024),” Lingo noted.
He said the ACCU price was projected to trade between around $39-44/t over 2025 and 2026 and growing to over $60/t by 2030, with significant demand for ACCUs of over 20 million tonnes per annum.

“This demand and the forecast strong price of ACCUs is likely to provide a strong market demand for the CH CCS Project,” Lingo said.

 

 

 

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.

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