Talon Energy Ltd (ASX:TPD) will begin supplying Santos-WA Ltd with gas from the Walyering Gas Project JV in Western Australia starting next quarter, a timely move to bring gas production from the field to market.
Talon and the project’s joint venture partner Strike Energy Ltd (ASX:STX) have entered into a five-year agreement with Santos to supply a minimum of 36.5 petajoules (PJ) of gas from the onshore Perth basin permit EP447 on a firm basis.
The contract includes tranches of firm gas volumes, which are contracted on a “take or pay" basis, and “as available” gas volumes, which provide the JV with the flexibility to supply additional production as the field ramps up towards maximum capacity.
Strike is the 55% owner and operator of the project with Talon holding the remaining interest.
Momentous moment
“The signing of the Gas Sales Agreement (GSA) with Santos is a momentous moment for Talon and the EP447 JV,” Talon’s chief executive officer and managing director Colby Hauser said.
“With the GSA now finalised, the focus of activities at Walyering will be on the imminent construction and commissioning phase of Walyering’s development, followed soon after by strong cash flows underpinned by this agreement.
“The firm pricing secured in the GSA provides a high degree of certainty with respect to future gas sales income for Talon, and in conjunction with our recent capital raise, provides the company with a strong foundation for its future project development and growth.”
The agreement is denominated in US dollars and linked to the US inflation rate.
Highly profitable project
The JV is constructing a low-cost gas processing facility and associated infrastructure at Walyering, with gas production being delivered into the Parmelia Gas Pipeline.
The Walyering gas field was discovered in 2021 and is a very profitable project due to low exploration and development capex of less than $15 million.
Talon has huge prospective gas resources in two regions which are short of gas: the Western Australian domestic market and the South Gobi region of Mongolia. The latter’s successful 2022 exploration resulted in a maiden contingent gas resource of 1.2 trillion cubic feet.