APA Group (ASX:APA), Australia’s largest natural gas infrastructure business, announced today it has entered into commercial agreements that will lead to the further development and expansion of its Mondarra Gas Storage Facility (Mondarra facility) in Western Australia to meet new service requirements for its customers in the region.
The Mondarra facility is an operating gas storage facility and is located on APA’s Parmelia Gas Pipeline, near Dongara, forming part of APA’s gas infrastructure in the Perth Basin region. Its strategic location provides interconnection with both the Parmelia Gas Pipeline and the Dampier Bunbury Pipeline.
APA has entered into a long term foundation contract with Verve Energy, Western Australia’s government owned electricity generator, for a substantial part of the increased capacity of the Mondarra facility. APA is continuing to engage with other potential customers for further services to meet growing demand for gas storage.
Over the past year APA has been engaged in reservoir analysis and in the design and early development of surface facilities for the expansion of the Mondarra facility.
This stage of expansion will involve construction of further surface facilities such as compression, pipeline interconnects, and treatment plants. The expansion is expected to result in commercial storage capacity of the Mondarra facility increasing by more than five times its current level to 15 PJ, as well as significantly increasing daily injection and withdrawal rates into and out of the facility. Over the next two years APA expects to spend up to $140 million to deliver this storage capacity and the service obligations under the Verve foundation contract. The contract provides Verve Energy with long term certainty in respect of gas storage services, and APA with long term revenue certainty commensurate with this level and type of capital investment.
APA Managing Director, Mick McCormack said the expanded Mondarra facility enhances APA’s gas infrastructure portfolio which serves a customer base of energy retailers, power generators, and industrial customers throughout the Midwest and Perth regions.
"Given the issues around gas supply in Western Australia in recent years, APA is taking the lead in developing a market driven outcome to enhance energy reliability and strengthen gas supply security for our customers. In addition, an expanded Mondarra gas storage facility will provide our customers with supply options and flexibility to better manage their gas supply and demand portfolios", he said.
APA has also welcomed the support for the expansion project from the Western Australian Government.
Mr McCormack added "The Western Australian Energy Minister and the Gas Supply and Emergency Management Committee he established recognise the major role the expanded Mondarra facility will play in shoring up the state’s energy security, minimising future gas supply disruptions for the state."
Engineering and procurement work has commenced, with completion of the expanded capacity scheduled for first quarter calendar year 2013. The Mondarra facility will continue to operate its existing contracted storage services during the expansion period.