Herbert Smith Freehills advised Buru and Mitsubishi on the unique Canning Basin Stage Gas Agreement.
The State of Western Australia announced it has entered into a State Agreement with Buru Energy Ltd and subsidiaries of Mitsubishi Corporation to facilitate the evaluation and accelerate the development of prospective gas resources in the Canning Basin.
While State Agreements have been a feature of major project development in Western Australia, this agreement is unique in its focus on exploration and that it ties natural gas sourced from onshore Western Australia to the State’s domestic gas pipeline system and provides for the interaction between domestic gas supply and the production of LNG for export.
The State Agreement will be introduced into the WA Parliament in the current sitting.
Lead partner, Stuart Barrymore said that the Joint Venture had been grappling with how to plan the exploration and appraisal of the conventional and unconventional gas resources in the Canning Basin against a backdrop of relinquishment of areas and difficult operating factors, including access to land, weather impacts and support facilities.
“Without the leadership and assistance from the State, there was a very real risk that the gas exploration effort in the Canning Basis region would become fragmented with long lead times before adequate resources could be found, tested, aggregated, developed and sold,” he said.
“The novel solutions embodied in the State Agreement give the Joint Venture confidence that they can design an appropriate exploratory and evaluation work program to properly test the prospectivity and deliverability of gas resources in their Canning Basin Permits. In return, the fruits of such efforts are prioritised for and marketed to the domestic customers in Western Australia.”
The Agreement records:
- a regime to encourage accelerated exploration and evaluation activities over a large part of the Canning Basin;
- a postponement of relinquishment conditions under the Petroleum and Geothermal Energy Resources Act for 5 permits;
- that work commitments on the Permits may be offset against gas appraisal work, allowing work programs to be optimised;
- sets a timetable for an assessment of the technical and economic viability of the natural gas resource;
- arrangements that facilitate and prioritise a domestic gas project, pipeline and associated infrastructure;
- a statutory framework to develop a domestic gas and a LNG pipeline facility;
- a framework for the development of an LNG project in the Pilbara once the domestic gas project and pipeline have been approved; and
- assurances that the State that major volumes of gas will be delivered into the Western Australian domestic market.
The Herbert Smith Freehills team that advised the Joint Venture was led by partner Stuart Barrymore with assistance from associates Julia Moffat and Maja Pecirep and specialised assistance from partner David Hugo on land and environment, and partner Will Oxby on native title and heritage.
The State Solicitor advised the State of Western Australia.
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