Real Energy locks in gas processing deal with Santos, Beach Energy, shares surge
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Junior oil and gas play Real Energy has locked in a gas processing deal with majors Santos and Beach Energy.
Santos and Beach Energy have gas processing facilities at Moomba in South Australia.
In the moments after trading opened on Monday morning the company’s shares had already bounced 7 per cent to 9c.
The gas processing agreement allows raw gas from Real Energy’s (ASX:RLE) Windorah project in the Cooper Basin to be processed into gas that can be sold into the east coast Australian gas market.
“The signing of the gas processing agreement allows us to commercialise our gas without the need to build an expensive gas plant and other associated infrastructure,” managing director Scott Brown told investors.
“These are significant agreements that potentially add considerable value to Real Energy not to mention the fact that these are major de-risking events for our project.”
An independent geologist estimates that Real Energy’s Windorah project hosts a 3C gas resource of 672 billion cubic feet of gas.
A 3C resource is a high estimate of how much oil or gas is in a deposit. A 1C resource is a low estimate and a 2C is a best estimate.
Real Energy has completed the well stimulation of Tamarama-2 and Tamarama-3 and will look to establish flow rates for these wells once most of the fracking fluids have been recovered from the wells.
Well stimulation, hydraulic fracturing, or fracking, is a method used on an oil or gas well to increase production by improving the flow of hydrocarbons. A combination of water and soapy additives is pushed down a well to crack open fissures to allow oil and gas to escape more easily.
East coast gas buyers are already showing interest in Real Energy’s gas.
The explorer signed a deal with Weston Energy in July to sell up to 3 petajoules of gas per year for five years, with a pre-payment of $6 million. In May it signed another deal with Santos for gas processing.