PERTH (miningweekly.com) – Oil and gas major Beach Energy has struck a heads of agreement (HoA) with BP in Singapore, to sell its share of liquefied natural gas (LNG) from the Waitsia Gas Project Stage 2.

Beach and JV partner Mitsuie E&P Australia last year committed to the initial funding for the 250 TJ/d Waitsia Stage 2 development, which involves the drilling of up to six wells, construction of a new 250 TJ/d  gas processing facility, and associated gas gathering infrastructure.

Total capital expenditure to first production is expected to be within the range of A$700-million to A$800-million.

The HoA  with BP contains all material terms and conditions that would allow BHP to purchase all 3.75-million tonnes of Beach’s expected LNG volumes from the Waitsia gas project Stage 2, with supply forecast to commence in the second half of 2023.

The annual contract volumes and supply terms are aligned to the provisions in the executed North West Shelf (NWS) gas processing and lifting agreements, Beach told shareholders, adding that the terms included built-in flexibility around the commencement of firm supply to ensure alignment with the completion of construction and commissioning activities.

Supply will be delivered on a free-on-board basis from the NWS facilities in Karratha, Western Australia, which leverages BP’s leading LNG trading and shipping capability.

Beach and BP are targeting execution of a fully termed LNG supply and purchase agreement in the second half of 2022.

Meanwhile, Beach on Tuesday released its annual investor update, outlining the company’s targeted production of 28-million barrels of oil equivalent for 2024, excluding exploration upside and pre-final investment decision projects.

Beach Energy MD and CEO Matt Kay said the company’s diversified base business was slated to deliver material gas production growth in the near-term, through the recently completed Kupe Inlet Compression project, future connection of the Offshore Otway wells and delivery of the Waitsia Stage 2 gas project.

“Beach’s corporate strategy focuses on filling our gas plants and supplying gas into the tightening Australian East Coast, New Zealand gas and international LNG markets,” Kay said.

“The successful delivery of first gas from the Kupe inlet compression project and the recently signed HoA with BP for all our marketed Waitsia Stage 2 LNG volumes represent the first runs on the board as we look to deliver our growth strategy.

“The offshore Otway and Waitsia Stage 2 developments are expected to provide significant production uplifts over the next two years, with the first of the offshore Otway wells on track to be connected in early 2022 with the recent Geographe 4 and Geographe 5 results meeting pre-drill expectations.

“Once complete, this investment programme is expected to see Beach’s gas business generate material stable free cash flows from our eight plants by the end of 2023, providing us with multiple free cash generation options.”

Kay said Beach’s base case scenario provided production uplift targeting 28-million barrels of oil equivalent in 2024, a 27% increase on the midpoint of 2022 guidance.

“We have built a business that is no longer reliant upon Western Flank upside, with base production growth not banking on 2022 exploration drilling success, although we do retain upside potential across all of our five basins,” Kay said.

“Material cash flows from our stable gas business will provide Beach with optionality, including re-investment into our high returning gas assets to maintain plateau production, maximising the value of our infrastructure and other capital management decisions.”

He said that emissions reduction was a core objective for the company, with an established operated emissions reduction programme and an aspiration to achieve net zero emissions by 2050.

“We are taking pragmatic steps forward in relation to decarbonising our operations, as we seek to deliver on our initial “25 by 25” objective to reduce Scope 1 and 2 operated emissions by 25% by 2025..

“In addition, we have completed FEED studies for the Moomba cabon capture and storage project, which is being led and operated by our joint venture participant Santos.

“This is a nation-leading project, which represents a true step-change opportunity in our emissions reduction agenda.”