Cooper Energy Eyeing South-East Gas Market; To Invest $55 Million in Minerva Gas Plant

Summary

• The wholesale gas market remained under pressure during the March 2020 quarter over weak demand and tumbling oil prices, offsetting the impact of gas supply shortage across the continent.
• However, with improvement in oil prices, LNG exports from the continent are poised to gain momentum with the Department of Industry, Innovation and Science is estimating it to surge from 79 million tonnes, seen in 2019-2020, to 80 million tonnes in 2020-2021.
• The surge in LNG export could once again support gas prices along with supply bottleneck across the continent.
• While hopes for gas prices are firming up, ASX-listed Cooper Energy Limited (ASX:COE) is making moves to cater south-east Australia and its existing customers.
• Cooper Energy, along with Mitsui Group, has decided to invest $55 million in the Minerva Gas Plant to leap into the south-east gas market across the continent.

The wholesale gas market remained under pressure during the first quarter of the year over falling demand and lowering oil prices, offsetting the supply shortage of gas across the continent, especially along the east coast.

The east coast gas demand stood at 429 petajoules during the March 2020 quarter, which remained largely in line with the previous corresponding period, mainly due to higher LNG exports from Curtis Island and a marginal increase in the residential, commercial, and industrial demand.

To Know More, Do Read: Wholesale Gas Prices Under Storm- Lens over Demand and Supply

However, the oil market is once again gaining momentum with Brent crude oil prices hovering above USD 42 per barrel, and many industry experts believe that by the end of 2021, oil demand would be restored to pre-crisis levels, which in turn, could once again boost the LNG exports from the continent.

Also Read: OPEC and Allies Ease Supply Cuts, Market Goes Range-Bound; Things You Should Know

The LNG exports from the continent are anticipated by subject matter experts to go up slightly from 79 million tonnes (2019-20) to 80 million tonnes by 2021-2022.

In order to further boost the gas supply across south-east Australia, the ASX-listed Cooper Energy Limited (ASX:COE) has committed a $55 million investment.

The Leap Into South-East Local Market

COE To Invest $55 Million in Minerva Gas Plant Possession

• COE, in conjunction with Mitsui Group, took possession of the Minerva Gas Plant in December 2019, in which both companies hold 50 per cent stake.
• Since taking the possession, the Company has completed the front end engineering and design work in order to support the final investment decision (or FID) concerning upgrade and connect the plant to process the gas produced from the existing Casino, Henry and Netherby fields.
• The Casino, Henry and Netherby fields are in the VIC L24/L30 permit areas, held conjointly with Mitsui Group.
• COE and Mitsui Group would now invest $37 million to upgrade the plant and have spent $17.8 million on front end engineering and design work and care and maintenance.
• The infrastructure works at the Minerva Gas Plant will enable the supply of 16 petajoules of undeveloped gas.
• On the domestic counter, COE anticipates that the project would create about 30 to 50 jobs during execution along with 20 ongoing local jobs.

Furthermore, the project would draw gas from a various offshore well, including Casino-4, Casino-5, Henry-2, and Netherby-1 into the Minerva plant through a pipeline tie-in and minor modifications, which in turn, would improve recovery enabled by lower plant inlet pressure, providing COE with the ability to offer customers firm supply.

The Minerva Gas Plant holds the capacity to process up to 150 terajoules per day and would be renamed to Athena Gas Plant.

COE Upgrades Solo Gas Project

In a separate notification to stakeholders previously, the Company suggested that it would upgrade and operate the plant in order to process gas from the Sole gas field for supplying existing customers in south-east Australia.

• At present, gas plant is owned and operated by APA Group (ASX:APA), contracted by COE to upgrade the plant to achieve the desired objective of the Company.
• The objective of the upgrade is to achieve plant performance that satisfies the commercial agreement between the parties, including a demonstration of the processing capability at a rate of 68 terajoules a day.
• The plant’s raw gas processing facilities commenced in March 2020 while demonstrating the capability to produce sales specification gas from the Sole raw gas stream.
• So far, a total of 1.8 petajoules of gas from Solo hub has been processed at the plant while supplying the Eastern Gas Pipeline up to 18 June 2020.
• The Company is currently selling the gas at spot market price netted against transportation.

Progress and Future Plans

Since 20 May 2020, the commissioning activities aimed at a progressively increasing the plant output rate with the ultimate target of 68 terajoules a day, and since commissioning activities took surface, the output of the plant has averaged at 34 terajoules per day.

• Furthermore, performance metrics have suggested that the plant could maintain a daily production in the range of 35 terajoules to 40 terajoules.

The Company also suggested that the resumption of operations from the second shutdown is expected in the week commencing 29 June, which would once again bring back a sustainable and a stable production rate while aiming at the ultimate target of processing 68 terajoules a day.

Market Reaction and Stock Price

The market seems to be reacting positively towards the latest announcement of the Company, which is further getting reflected on the recent improvement in the stock price on the exchange.

The stock of the Company has recovered considerably from its recent low of $0.360 (intraday low on 29 June 2020) to the present high of $0.425 (as on 17 July 2020), and at present, the stock is hovering around the same.

As on 21 July 2020, COE last traded at $0.420, unchanged as compared to its previous close on ASX.