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Empire Oil And Gas Poised To Start Commissioning Of Red Gully Gas Plant

Empire Oil and Gas (ASX: EGO) has begun pre-commissioning activities for its Red Gully Gas and Condensate Processing Facility near Gingin, Western Australia, as construction activities end.

The commissioning of the Facility is scheduled for May with the first gas due in late May 2013.

Pre-commissioning activities have so far included selective parts of the plant which have been energised with low voltage power to enable function testing of instrumentation. This will progress systematically throughout the plant.

Empire is also advancing through the tendering process for the condensate road haulage contract with tenders going out to several local road transport companies.

This is required to meet BP Kwinana's strict safety management system, which allows only certain road tanker configurations entry into the Kwinana Refinery.

The configuration requires an approved Strict Safety Case. It is expected that condensate will begin to be trucked out in the coming weeks

Empire is raising up to $6.19 million through a non-renounceable entitlement issue to existing shareholders of one share priced at $0.01 each for every nine shares held as of 1 May 2013 to meet the final cost of the facility, which has received a final estimate of $34.87 million.

Of the funds raised, $5.23 million will be used to pay for Empire's share of the difference in the final cost of the Red Gully facility ($34.87 million).

Final costs for the Red Gully plant were up by about $5.7 million due to increased construction and commissioning costs including the cost of skilled trades personnel.

Additionally, as a result of Wharf Resources Plc default, Wharf's 10% share of the difference for the EP389 costs will be covered by Empire and ERM Gas Pty Ltd. Empire's total share of the difference and of Wharf Resources share is $5,230,547.

The Facility will produce gas and condensate from the Red Gully-1 and Gingin West-1 wells. Commissioning and early production will be carried out to provide the optimal production rates to maximise condensate yields from the two wells.

The current discovery 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.

Empire has a 76.39% interest in the joint venture while ERM Gas, a subsidiary of EPM Power (ASX: EPW), holds 23.61%.

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