- Red Sky Energy (ROG) is set to supply Viva Energy (VEA) with 100 per cent of the fuel it produces in South Australia, pending government approval
- Viva supplies the vast majority of airports and airfields in Australia with aviation fuel
- Viva owns the Geelong refinery and also makes bitumen, vehicle fuel, marine fuel, chemicals and lubricants
- The move has seen more than 34 million shares in Red Sky turnover today versus a four-week average of eight million
- ROG shares are up 20 per cent, trading at 0.6 cents at 12:42 pm AEST
Red Sky Energy (ROG) has inked an agreement to supply Viva Energy (VEA) with 100 per cent of the crude oil produced from its Killanoola oil field in South Australia.
The two companies have signed a sale agreement that is benchmarked against dated Brent Crude prices.
However, for the deal to proceed, the company must first obtain government approval. Once approval is granted, production can commence from DW1, which is the name of a target zone of interest at Killanoola.
In April last year, the company boosted its count of the amount of oil contained in the field based on onshore seismic data.
Red Sky uses the lower-confidence Petroleum Initially In Place (PIIP) reading.
The Society of Petroleum Engineers (SPE) defines PIIP as “that quantity of petroleum estimated, on a given date, to be contained in known accumulations, plus those quantities already produced therefrom.”
When Red Sky raised its PIIP estimate to over 90 million barrels, it marked a 1228 per cent increase. Subsequently, in April 2023, Red Sky updated its PIIP estimate to a best estimate of 135 million barrels of oil, with a high estimate of 157 million barrels.
Viva Energy is a significant player in the Australian energy market, supplying up to a quarter of the country’s liquid fuel. It provides fuel to Shell and serves as the primary supplier of airport fuel to most runways in Australia. Viva Energy also operates a heavy lubricants division.
Crude oil can be refined into various products, including fuel and industrial chemicals. Viva Energy owns a refinery in Geelong that produces bitumen, marine fuel, and other industrial chemicals.
Red Sky shares were up 20 per cent, trading at 0.6 cents at 12:42 pm AEST.