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Empire Oil & Gas Hands Out Key Red Gully Plant Contract

Empire Oil & Gas (ASX: EGO) has awarded the commissioning, operating and maintenance contract for its Red Gully Gas and Condensate Processing Facility in Western Australia to Oceaneering Services.

The commissioning procedures are now being established with Oceaneering in consultation with design engineers from Momentum Engineering, construction engineers from Primero Group, together with Empire personnel.

Oceaneering's Perth based team currently operate and maintain six other facilities in the Perth Basin and have a proven track record with local regulators and authorities.

Their local experience and availability of technically trained personnel to assist in the final stages of the construction of the facility, including the commissioning and operating is an important appointment for the development.

Empire has also decided to undertake commissioning once the entire facility is handed over from Primero Group at Practical Completion Stage.

This is expected to occur in March 2013 in order to optimise the construction schedule and to improve the efficiency of commissioning.

The company had originally planned to commission the plant in stages from January 2013.

Commissioning and early production will provide the optimal production rates to maximise condensate yields from the Red Gully-1 and Gingin West-1 wells, which are the Jurassic aged condensate rich gas wells to be developed in the Perth Basin.

The wells are very high in condensate, producing between 50 to 80 barrels of condensate (light crude oil) per 1 million cubic feet of gas.

Gingin West-1 flowed 7.5 million cubic feet (MMcf) of gas and 375 barrels of condensate per day during testing while Red Gully-1 flowed 12MMcf of gas and 832 barrels of condensate during testing.

Red Gully Gas and Condensate Processing Facility

The processing facility located near Gingin, Western Australia, is designed specifically to comply with both the DBNGP (pipeline) and the BP Refinery specifications and also with strict environmental and safety provisions.

Its design now includes the removal of most liquefied petroleum gas such as propane and butane from the condensate to meet the refining requirements.

This is had required additional components to be designed and manufactured in the U.S. for installation to ensure the removal of the LPGs.

Other design changes required include modifications that will reduce the facility's emissions & minimise any potential carbon tax liabilities.

Several components of the Red Gully Processing Facility are ahead of schedule with the installation of key mechanical equipment packages (export compressors, pressure vessels and heat exchangers).

The main earthworks activities have been completed by Lenane Holdings and the export pipeline has been buried and pressure tested by Thistle Fabrication. The "hot tap" entry facility into the Dampier to Bunbury Pipeline has been completed by the DBP.

Remaining work, consisting of the installation of piping and electrical and instrumentation has also started.

The final cost of the facility is now dependent on the progression of the construction activities to Practical Completion.

An update is expected once aspects of the design changes and the timing impact of other changes have been fully assessed.

Gas produced at the Red Gully facility will be sold to Alcoa (NYSE: AA) under the existing gas sales agreement for 15,000 terajoules of gas that was reached in October last year.

Condensate will be sold to the BP Refinery at Kwinana, Western Australia.

Partners in EP 389 are Empire with 68.75%, ERM Power (ASX: EPW) with 21.25% and Wharf Resources with 10%.

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