Production completion installation via workover rig at W5. Source: Strike Energy
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  • Strike Energy (ASX:STX) has further enhanced its status as a WA gas producer
  • The company will sell gas from the Perth Basin to South32 and AGL
  • South32 wants the gas to move an alumina project from coal to gas-fired power
  • AGL’s deal reflects a renewal of an existing agreement
  • Both agreements are take or pay
  • Shares last traded at 38 cents

Strike Energy (ASX:STX) will become a domestic WA gas supplier to South32 and AGL via new gas sales agreements.

The gas will come directly from South Erregulla onshore Australia’s west coast.

Some 42 petajoules (PJ) of gas production have been covered in the sales documents.

South32’s Worsley Alumina JV will receive 35.5PJ of gas for a period of 5 years and AGL’s Perth Energy will receive 5.475PJ of gas for a 3-year period.

Strike says move underpins its 40-terajoules-per-day phase one development. South Erregulla overlies the prolific Perth Basin.

Transition commodity

“The sale of this gas into the State’s electricity and mineral refining markets continues to demonstrate Strike’s commitment to supporting the energy transition of Western Australia,” Strike CEO Stuart Nicholls said.

“The agreements with the Worsley Alumina Joint Venture and Perth Energy provide a commercially attractive route for Strike to sell.”

While framing gas as green has always attracted critics, Nicholls’ comments intend to capture the sentiment that gas is preferable over coal in transitioning out the latter.

Technical details of deals

Under the agreement with South32, Strike will port gas to an alumina JV operated by a subsidiary of the miner.

20 terajoules (TJ) of gas a day will go to the facility on a take-or-pay basis.

The price will be in AUD and also matched to WA’s inflation rate.

South32 is keen to have gas power at Worsley so as to decarbonise the project in a move from coal to gas.

Secondly, AGL’s deal is a renewal of an existing agreement, which now sees the utility offtaking 5 TJ of gas per day from Strike’s Erregulla.

Like South32, this deal is also take or pay – effectively meaning AGL is locked into buying the gas. Strike pointed to increased “electrification”.

Shares last traded at 38 cents.

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