Alcoa of Australia, a subsidiary of US$17 billion Alcoa Inc (NYSE: AA), will provide up to A$22 million in funding at the Warro project, a joint venture with Transerv Energy (ASX: TSV).
As part of a farm-in agreement, Alcoa will fund A$100 million of total project works expenditure to earn a 65% participating interest.
Following the merger of Transerv with Latent Petroleum Pty Ltd, the combined entity will hold a 35% interest in the Warro Gas Project and is free carried for the first A$100 million of expenditure on the project as funded by Alcoa.
Warro is an onshore field in the Perth Basin, with reservoir covering an area of nearly 7,000 hectares with up to 5 trillion cubic feet (TFC) of gas in place.
Gaffney Cline estimates the Warro field contains a 3C recoverable resource of 2.1 TCF, or 1.14 TCF of 2C recoverable.
The Warro tight sands are 3,700 to 4,200 metres deep, with large net pay of about 350 metres.
Warro-2 previously confirming a 390 metre gas column in the Yarragadee Formation.
When discovered in the 1970's, the depressed gas price meant Warro was uneconomic, with the increasing gas demand and therefore price now providing a sufficient potential return on investment for big players such as Alcoa to enter.
If Warro continues to prove successful, gas can potentially supply part of the gas needs for three of Alcoa Australia's Western Australia based refineries, and the wider Western Australia community, at a time when gas supply remains a critical issue.
Currently Western Australia is experiencing a shortfall in gas supply, with North Shelf operators placing a higher priority on the more lucrative LNG markets, which in turn is forcing up the price of domestic gas.
The new drilling will focus on the Warro 4 well and a 3D seismic program over the Warro Project area, commencing in February, followed by drilling which is anticipated to begin in April.
Warro is located 200 kilometres north of Perth and 31 kilometres east of both the Dampier-Bunbury Natural Gas Pipeline and the Dongara-Perth Parmelia Pipeline.