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Empire Secures Pipeline Licence For Red Gully Gas Plant

Empire Oil & Gas (ASX: EGO) has reached another milestone in the development of the Red Gully Gas and Condensate Processing Facility in the Perth Basin with the award of a pipeline licence.

Pipeline Licence PL96 from the Western Australian Department of Mines and Petroleum covers the export pipeline that will link the facility to the Dampier to Bunbury Pipeline.

Empire is now poised to start earthworks and the construction of the facility, which is capable of processing 10 million cubic feet of gas and associated condensate.

All long lead items for the plant have already being ordered with construction of the key compressor components carried out in Houston.

Gas from the Red Gully-1 and Gingin West-1 will be processed at the plant and sold to Alcoa (NYSE: AA) under the existing gas sales agreement that was reached in October last year.

Empire had then agreed to sell 15,000 terajoules of gas to Alcoa in two tranches from November 2012, when the plant is expected to be commissioned and producing gas.

Alcoa is paying A$25 million for the first tranche Forward Gas Sales component, which effectively underwrites the cost of the Red Gully gas condensate facility, while the second tranche is a standard gas sales agreement.

Any condensate produced will be sold to the BP Refinery at Kwinana, Western Australia.

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.

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

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