Denison and Comet Ridge are working together to explore the possibility of enabling early gas production from Comet Ridge’s Mahalo North to be transported to the supply-constrained east coast market via Denison’s existing infrastructure.

 Denison and Comet Ridge (ASX:COI) are undertaking a jointly funded front-end engineering design (FEED) study to facilitate early gas production from the Mahalo North project in Queensland to market.

The pair appointed Verbrec as the nominated engineering firm that will undertake the study.

The FEED study will determine process design, equipment selection, plant layout, project scope and budget required to upgrade Denison’s existing infrastructure to accommodate the supply of 10 terajoules/day of gas production from the Mahalo North project, located only 14km from the Denison infrastructure.

Importantly, Denison’s existing infrastructure capacity, along with potential scale upgrades, provides the opportunity for the company to not only meet its own planned increases to production, but also consider aggregating other third-party gas supplies where appropriate.

“Our development plans with Comet Ridge are a great opportunity to boost gas supply for the east coast market and further utilise our gas infrastructure capacity,” Denison CEO Benson Wong said.

“Denison has the potential for further economies of scale to be realised by aggregating new gas supplies in the region where appropriate.”

The east coast market is experiencing a worsening gas supply crisis.

The Australian Competition and Consumer Commission sees 2023 as the year the market will experience the largest projected supply shortfall since the competition watchdog launched its inquiry into gas supply six years ago.

The ACCC’s most recent report, released mid-2022, predicted a 56 petajoule (PJ) supply shortfall this year – massively higher than the 2 PJ shortfall predicted for 2022 in July of 2021.

“Supply conditions in the east coast market are expected to deteriorate significantly in 2023, with a shortfall of 56 PJ now expected,” the report says.

“This is equivalent to around 10% of domestic demand and is the largest projected supply shortfall we have forecast since the inquiry commenced in 2017.”

Late last year, Denison revealed it had secured a new three-year gas sales agreement with global heavyweight Shell, via the wholly owned Shell Energy Australia subsidiary.

The deal, which kicked off at the start of this year, is for the supply of up to 5.5 PJ of gas from Denison’s conventional and unconventional assets in the Bowen Basin to Australian residential, commercial, and industrial customers.

“Gas demand in the east coast market continues to be strong,” Wong noted. “As a result, the company remains focused on initiatives to drive higher production levels.”

Once results of the FEED study are finalised, Denison and Comet Ridge intend to finalise and execute commercial arrangements that would see Denison compress, dehydrate, and transport Mahalo North gas production for delivery into the east coast gas market.

This article was developed in collaboration with Denison Gas, 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.