Ann: Sole Gas Project, page-7

Gas pipeline owner APA Group has struck a deal with Cooper Energy to provide the processing infrastructure needed for Cooper's Sole gas project off Victoria, reducing the cost of the investment for the oil and gas junior.

Under the preliminary agreement announced on Monday, APA will buy and invest $250 million in upgrading the onshore Orbost gas plant, leaving Cooper to fund the circa $355 million for the offshore development.

APA will process gas from Sole and deliver it to customers by pipeline.

The deal is the latest to be put in place by Cooper as it aims to reach a final investment decision next month for Sole, one of the few new gas projects moving ahead in response to the tight east coast gas market. Gas from Sole is due to be sold to a range of customers, including AGL Energy, EnergyAustralia and glassmaker O-I Australia.


Cooper managing director David Maxwell said the company could now put in place the financing arrangements to allow for a final investment decision next month. The company could sell down part of its 100 per cent stake in the upstream part of the project after financial close, but that is not required to be able to secure financing, Mr Maxwell said on a conference call.

"This is the start of a six year production growth profile," he said, noting that first Sole and then the nearby Manta gas field would deliver "step changes" in output for Cooper Energy in 2019 and then 2021 to exceed 10 million barrels of oil equivalent (boe) a year.

For APA, the investment in the Orbost plant will be underwritten by gas processing contracts signed with Cooper. The terms of those are "commercial and confidential", Mr Maxwell said.

APA managing director Mick McCormack said APA had been seeking opportunities to fund and develop new projects in the "midstream", gas processing part of the gas infrastructure sector. In August he pointed to $1.5 billion of possible growth investments in the Australian market within the next three years, including about $300 million in "midstream" areas.

He said the Orbost deal "represents a significant opportunity for APA to expand this aspect of its business" and noted that Sole has the potential to be a source of significant new gas for the eastern states market.

Cooper also reported a large increase in proven and probable reserves, up more than eight-fold to 11 million boe, with a further jump to come when the Sole project gets the official go-ahead.

The oil and gas producer reported a bottom line net loss of $8.2 million for the first half of 2016-17, narrower than the $34.1 million deficit of a year earlier. Sales slid 25 per cent to $11 million on lower sales volumes and oil prices.



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