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Empire Oil and Gas in the final lap for Red Gully gas plant

Last updated: 16:03 08 Mar 2013 AEDT, First published: 17:03 08 Mar 2013 AEDT

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Empire Oil and Gas (ASX: EGO) is now moving towards the final stages of the majority of works at its Red Gully Gas and Condensate Processing Facility in the north Perth Basin.

These include the electrical work and piping, which continue to be the highest priority for the company.

Electrical and instrumentation works, which form a critical part of the facility, are ongoing with electrical being installed throughout the plant and connected back to the Motor Control Room.

Conduit and ladder containment and cable support systems continue to progress and regular deliveries are still arriving into the secure storage.

The installation of tubing, electrical instrumentation, electrical termination, lighting and small power are near completion.

Meanwhile, the final components of the slug catcher, which is being manufactured offsite, are nearing completion and will be delivered to site shortly as a complete unit.

The supports for this have already been installed. The Slug Catcher captures liquids that settle in the plant process from the gas stream.

Flowline piping installation has been completed from the wellheads to the plant.

All major foundation and civil works have been completed while the bulk of mechanical works are installed.

The specially manufactured Gas Engine Alternator has been installed with ongoing piping and electrical works being completed. Piping has also been completed in the Flash Gas Compressor area in preparation for the arrival of the Compressor this month.

Lastly, but not least, structural work on the facility is continuing with a small percentage still to be undertaken. The workshop structure is continuing to be erected and completed.


Red Gully Gas and Condensate Processing Facility

The Red Gully Gas and Condensate Processing Facility will produce gas and condensate from the Red Gully-1 and Gingin West-1 wells.

The current discovery wells are very high in condensate, producing between 50 to 80 barrels of condensate (light crude oil) per 1 million cubic feet of gas.
   
Gingin West-1 flowed 7.5 million cubic feet (MMcf) of gas and 375 barrels of condensate per day during testing while Red Gully-1 flowed 12MMcf of gas and 832 barrels of condensate during testing.

Commissioning and early production will be carried out to provide the optimal production rates to maximise condensate yields from the two wells.

Gas produced at the Red Gully Facility will be sold to Alcoa (NYSE: AA) under the existing gas sales agreement for 15,000 terajoules of gas that was reached in October last year.

Alcoa is funding $25 million of the estimated $29.1 million Red Gully plant.

Condensate will be sold to the BP Refinery at Kwinana, Western Australia.

Partners in EP 389 are Empire with 68.75%, ERM Power (ASX: EPW) with 21.25% and Wharf Resources with 10%.


Analysis

With construction work at the Red Gully facility at its final stages, Empire is on the verge of becoming a significant gas and condensate producer in the Perth Basin.

Empire is undertaking the 3D Wannamal Heliportable Seismic Survey commencing in March 2013 to identify mature drilling targets nearby to the Facility estimated to have potential recoverable reserves of 205 BCF and 9.2 million barrels of condensate.

The Company also has a three well programme this year for oil in three of its North Perth Basin permits. These include Waugh-1 near Dongara, Black Arrow-1 near Jurien Bay and Charger-1 near Three Springs.

Unconventional prospectivity of the Onshore Perth Basin will be assessed throughout its 2013-2014 drilling programme and seismic operations.


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