Leading Australian gas pipeline operator theAPA Group has signed a non-binding Heads of Agreement (HoA) with Cooper Energy Limited aligning the two companies in the development of Gippsland Basin gas projects to bring new sources of gas supply to south east Australia.
negotiate APA’s acquisition, upgrade, and operation of the strategically located Orbost Gas Processing Plant in conjunction with Cooper Energy’s development of the offshore Sole Gas Field.
The companies believe the transaction will streamline the Sole Gas Project by separating funding, development and operating responsibilities for the gas processing infrastructure and upstream elements, whilst also encouraging the utilisation of the Orbost Gas Processing Plant as a hub for other new gas projects such as the Manta Gas Field.
The Transaction basis to be finalised will include:
* APA will acquire the Orbost Gas Processing Plant from Cooper Energy;
* As owner of the Orbost Gas Processing Plant, APA will fund all capital expenditure associated with the expansion and upgrade of the plant to process natural gas from the Sole Gas Project. Capital expenditure for the upgrade is anticipated to be approximately A$250 million and will be underwritten by the gas processing contracts to be entered into by the parties;
* Cooper Energy will fund all capital expenditure associated with the offshore development of the Sole Gas Project, including all drilling activities, subsea infrastructure, offshore pipeline and the associated shore crossing. Capital expenditure for the offshore development is anticipated to be approximately A$355 million;
* APA and Cooper Energy will enter into a Gas Processing Agreement for the processing of gas and delivery of gas by APA to market; and
* A series of associated agreements will facilitate co-operation between the parties during the construction and development of the Orbost Gas Processing Plant and the Sole Gas Project and their ongoing operation. These agreements will allow Cooper Energy to process natural gas from the Manta Gas Field and APA to process third party gas, through the Orbost Gas Processing Plant.
The HoA provides for Cooper Energy to work exclusively with APA until the end of April 2017 to finalise and execute binding documentation to implement the Transaction. During this period, Cooper Energy will seek to finalise its funding arrangements for the development of the Sole Gas Field.
APA managing director Mick McCormack said the agreement meets his companies expansion plans.
“APA has been seeking opportunities to fund and develop new projects in the midstream infrastructure sector. Acquisition and development of the Orbost Gas Processing Plant represents a significant opportunity for APA to expand this aspect of its business,” Mr McCormack said.
“Our team has undertaken extensive technical and commercial due diligence on the Transaction over the past few months. We believe that the Sole Gas Project has the potential to be a source of significant new gas supply to the Eastern Australian market. We look forward to working with Cooper Energy to finalise our arrangements so that Cooper Energy can bring this project to commercialisation through APA owned energy infrastructure.”
Cooper Energy MD, David Maxwell, said that by having the HoA in place, Cooper is now able to proceed with the final phase of securing what it needs to finance the Sole Gas Project.