Western Australia is regarded world-wide as a gas producing powerhouse. Since the first domestic gas production flowed in 1984 and then five years later the start-up of LNG shipments from the North West Shelf Venture project to Japan began, WA gas has provided critical energy to customers around the world.
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40 plus years later, WA’s northern offshore gas fields continue to power the state and its Asian neighbours. But there is a cliff looming with gas resources in decline and exploration stagnant.
However, there is a stranded gas asset that is on target to fill some of those holes. Discovered by US oil and gas independent Hess in 2008, the Equus gas/condensate field has sat idle off the WA coast for years.
Hess spent about $US1.5 billion over ten years trying to explore and develop the Equus gas project off Western Australia before selling it off after running into financial issues.
Now in the hands of local junior Equus Energy (ASX: EQU), the time for this liquids-rich gas project is fast approaching.
The forecast of declining underlying gas production combined with potential access to substantial northern WA processing capacity, has provided Equus Energy with the opportunity to unlock this significant asset.
In an exclusive interview, the company’s MD Will Barker told The Market Online thar Equus is now positioned as a meaningful source of additional gas to feed North West Shelf infrastructure and Asian customers.
“We are looking to have access to the infrastructure where there is available capacity, especially in the LNG plants – and the market is in the right time and place,” Mr Barker said.
“So, I think that momentum has changed now, where all of those elements have aligned.
“The opportunity for Equus is becoming increasingly clear. North West Shelf gas production is in steep decline, with existing LNG facilities facing significant spare capacity in the early 2030s at the same time as Western Australia requires new sources of domestic gas.”
Equus has worked with Woodside on plans to support the Pluto gas facility with specialists investigating the ability to connect Equus gas into Pluto’s offshore manifold, The gas would be transported through the Woodside pipeline offshore and then processed onshore through the Pluto facilities.
Equus has also held discussions with Santos with regard to also piping gas through its facilities.
The opportunity Equus offers was recently confirmed when WA’s largest domestic gas customer, Alcoa, executed a binding long-term gas sales agreement (GSA) in mid-August and became Equus Energy’s’ foundation domestic gas customer.
At the same time Alcoa also agreed to become Equus’ funding partner for up to US$30 million.
A month later Alcoa again confirmed its confidence in the project when it accepted the stage one pre-FEED deliverables and approved Equus to progress to stage two, unlocking US$1.5 million of additional funding to support project partnering activities.
“We are ideally positioned to help fill that supply gap. We have a large, independently certified gas resource, a capital-efficient development pathway that leverages existing infrastructure and a binding 10-year domestic gas agreement with Alcoa,” Mr Barker said.
He noted that the stage two agreement is another key milestone in progressing the next major phase of the Equus gas project, focused on advancing commercial and partnering activities required to progress the project.
Equus Energy has now commenced engagement with strategic operating partners and will launch a broad process targeting upstream partners, LNG offtakers, infrastructure and financing partners in Q4 2026.
Equus Enerrgy has approximately $16 million in the bank and plans to farm down its 100% ownership of the project to around 50% initially. It may later pursue additional sell-downs to LNG customers, infrastructure funds, private equity, or trading houses.
The desired retained interest is approximately 20% to 30%, provided Equus is effectively carried or financed through development.
Mr Barker said the project requires partners with substantial balance sheets and offshore operating capability to support the estimated development capex of between $3 million to $3.5 billion.
He pointed out that there are a number of different style investors already showing interest in a marketplace where international groups are moving to tie-up Australian gas assets. with the global unrest has again highlighting Australia’s reputation as a safe, reliable LNG seller at a time when Middle East projects are under attack.
With an initial potential to produce 350 million cubic feet per day for more than 15 years to feed the export of about two million tonnes of LNG annually, supply 50 terajoules of natural gas per day domestically and produce more than 12,000 barrels of condensate daily, Equus is indeed a high value asset, with significant upside.
“Hess made 15 discoveries out of 17 wells, so there’s a lot of additional resource that we can approach,” Mr Barker said.
The project is also looming as an opportunity to develop a number of stranded gas-condensate fields in the area.
Stage one pre-FEED studies confirmed a technically robust and capital-efficient development concept based on a phased tie-back utilising a leased FPSO, third-party pipeline infrastructure and existing LNG and domestic gas processing facilities.
The subsequent economic evaluation estimated a project NPV10 of US$867 million and IRR of 31%
“Our focus now moves firmly to project partnering. With 100% ownership of Equus, we have significant flexibility to bring in the operating, LNG, infrastructure and financing partners required to advance the project toward FEED and FID and realise value for shareholders.”