New gas pipeline opens up Perth Basin for emerging producers

Special Report: A new $460m gas pipeline that will take gas from Western Australia’s prolific Perth Basin is a game changer for future producers in the region.

Australian energy infrastructure heavyweight APA Group has realised the potential of the Perth Basin to become a significant supplier of gas to the WA domestic market.

APA revealed yesterday a $460m commitment to building a 580km-long pipeline that would transport gas from the Perth Basin to the resource-rich and energy hungry Goldfields region.

This is a major coup for emerging producers in the Perth Basin, like Talon Petroleum (ASX:TPD) which is gearing up to drill its Walyering-5 appraisal well with partner Strike Energy (ASX:STX).

Strike’s and Warrego Energy’s recent exploration success at the ultra-deep West Erregulla-2 well propelled the Perth Basin into the spotlight as Australia’s next leading gas province.

Talon managing director and CEO David Casey said APA’s decision to connect the Perth Basin to the WA gas grid was a significant development for all Perth Basin players and further recognition of the basin’s potential to be a major gas producer.

“It is also another vindication of Talon’s strategy to add the Walyering project to our portfolio and focus on the West Australian gas market,” he said.

Talon and Strike are targeting an in-place best estimate prospective resource net to Talon of up to 38.7 billion cubic feet of gas and 0.98 million barrels of condensate.

Drilling of Walyering-5 is expected to begin in mid-2021, with the joint venture partners recently securing the same rig that drilled Strike’s headline grabbing West Erregulla discovery.

Talon has already determined that Walyering-5 has good quality gas, containing less than 1 per cent carbon dioxide, which requires very minimal processing. This also lowers the cost.

Additionally, the high condensate ratio has the potential to further enhance the economics of Walyering.

That along with the permit’s proximity to both existing pipeline infrastructure and potential commercial gas users could see very early and rapid commercialisation of any discovery, Talon says.

Gas shortage on the horizon

Talon is advancing its Perth Basin permits at the same time as a gas shortage is looming.

Woodside Petroleum’s (ASX:WPL) decision to push back a final investment decision for the Browse and Scarborough gas projects could lead to a tightening of domestic gas supplies.

This is further exacerbated by Mitsui and Beach Energy (ASX:BPT) securing in-principle agreement from the Western Australian government to use gas from its Waitsia project to fill available capacity at the North West Shelf.

This will remove more gas from the domestic market, which is predicted to be facing a shortage by 2025.

Casey previously told Stockhead that the supply-demand gap was only increasing and that the market was definitely there for any new gas discoveries made in the Perth Basin.

“The gap will only get wider and wider if these delays continue,” he said. “With the delays to the LNG projects, I can’t see any of that gas coming south.”

Casey believes there is more than enough gas in the Perth Basin to supply both the North West Shelf and Western Australia’s domestic market.

The new gas pipeline is expected to be operational around mid-2022.

APA CEO and managing director Rob Wheals said that by connecting existing pipelines, the company’s investment decision to build the Northern Goldfields Interconnect would not only add capacity to the system but also increase gas supply options for customers.

“This will open up new regions for development supporting thousands of jobs both during and post-construction,” he said.

This article was developed in collaboration with Talon Petroleum, 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.