Home > Orica acts on gas cliff with $52.5 m Strike deal

Orica acts on gas cliff with $52.5 m Strike deal

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Chemical company Orica has reached a deal with Strike Energy, a Cooper Basin explorer, making pre-payments of up to $52.5 million to help develop coal seam gas supplies expected to be delivered in 2016 or later.

The fertiliser and explosives maker has kept quiet on the debate on gas developments on the east coast, which have been earmarked for export and are driving up prices, though The Australian reports that yesterday its CEO Ian Smith finally expressed concern over the situation.

Heavy industrial users such as chemical companies are worried about the difficulty in securing long-term gas supplies and the rising price of the resource. A “gas cliff” predicted for 2016 as major east coast production comes on line.

“We’re not only looking at the inability for new developments but a number of our existing developments are under threat because they haven’t got confidence about their gas supply into the later part of this decade,” PACIA’s CEO Margaret Donnan told Ferret recently.

Orica’s deal with Strike is unlikely to produce any gas pre-2016, reports Fairfax, and Strike’s managing director David Wrench would not give the price Orica would pay, but suggested there would be benefits.

"This is a break-out transaction for Strike, providing the opportunity to unlock substantial value for our Southern Cooper Basin gas project," Wrench said.

Orica’s CEO Ian Smith said that, “This agreement has the potential to provide a future new source of gas supply to our Australian east coast manufacturing plants at an affordable price.” 

Business Spectator reports that there are estimated reserves of between 6.3 and 16.4 TCF in Strike’s Cooper basin shallow coal seams.

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