PERTH (miningweekly.com) – ASX-listed Cooper Energy and APA Group have signed a nonbinding heads of agreement over the Orbost gas processing plant, in the Gippsland basin.

Under the agreement, the two companies will exclusively negotiate APA’s acquisition, upgrade and operation of the Orbost processing plant in conjunction with Cooper Energy’s development of its offshore Sole gasfield.

APA will acquire the gas processing plant for an amount reflecting Cooper’s expenditure on the plant and, as the owner, APA will fund all capital expenditure (capex) associated with the expansion and upgrade of the plant to process natural gas from the Sole gas project.

The project will require an estimated capital spend of around A$250-million, which will be underwritten by the gas processing contracts to be entered into by the parties.

Cooper Energy will fund the A$355-million capex required to develop the Sole project.

The heads of agreement provided for Cooper to work exclusively with APA until the end of April to finalise and execute binding documentation to implement the transaction.

“APA has been seeking opportunities to fund and develop new projects in the midstream infrastructure sector. Acquisition and development of the Orbost gas processing plant represents a significant opportunity for APA to expand this aspect of its business,” said APA MD Mick McCormack.

“We believe the Sole gas project has the potential to be a source of significant new gas supply to the Eastern Australian market,” he added.

Cooper Energy MD David Maxwell said on Tuesday that, for its part, Cooper will now concentrate its capital and efforts on exploration, upstream development and production, as well as gas markets.

“With this heads of agreement in place, we are now able to proceed with the final phase of securing what we need to finance the Sole gas project.”

A final investment decision on the 25 PJ/y Sole project is expected in the March quarter.

Cooper Energy has previously secured offtake contracts for 20 PJ/y of production from the proposed project, and first gas from the project is targeted for March 2019.