WestSide managing director Mike Hughes, who said the contract was a company-maker that would l transform WestSide into a significant gas producer, revealed that the agreement was to provide up to 65 Terajoules per day, while the gas price would also become oil-linked in 2016.
"A conservative development plan could see the Meridian joint venture supplying 40TJ/d by 2017, in which case WestSide's share of revenues over the contract term could significantly exceed $1 billion," Hughes said.
The GLNG pipeline route is adjacent to the Meridian gas fields near Moura in the Bowen Basin and WestSide said it would need just a $40 million funding package to reach 40TJ/d over three years "while expansion to 65TJ/d and beyond will require additional investment".
Santos, which has been on the hunt for additional third-party gas for some time, said the Meridian fields had current installed compression capacity of 30TJ/d.
To put the Meridian supply in perspective, the GLNG joint venture has previously disclosed that a daily average flow rate of 1200TJ/d over a year was required for the project's two trains (600TJ/d each) "to meet the foundation offtake agreement commitments alone".
"Today's agreement with the Meridian joint venture builds on GLNG'S existing diverse gas supply portfolio, which includes gas from the GLNG acreage, underground storage, supply from Santos' portfolio and other third parties," GLNG downstream vice president Rod Duke said.
"When combined with GLNG's quality offtake agreements, this gas supply portfolio delivers significant value to the project."
Duke confirmed that the project was on schedule for first LNG in 2015 and that construction was approaching 80% completion.
"Upstream field performance from Fairview and Roma continues to perform either in line or above expectations," he said.
"All of the gas transmission pipeline is now buried and work has commenced on pushing the pipeline through the marine crossing tunnel, and the first train 2 module shipment left the yard last week."
Hostile takeover bid
WestSide received a $160 million hostile takeover bid (36c per share) from China-based Landbridge Group almost three weeks ago.
In announcing the gas supply deal today, WestSide further confirmed that Landbridge's proposal was "manifestly inadequate".
Westside, which has a 51% stake in the Meridian JV (Mitsui 49%), has claimed that its share of these fields amounts to 47.2PJ of 1P reserves and 347 of 2P reserves.
WestSide is also chaired by former boss of coal producer New Hope, Robert Neale. Washington H. Soul Pattinson, which owns more than 60% of New Hope, has a 17.62% stake in WestSide.
Shares in WestSide were up 10.7% to 31c this morning.
The GLNG project is targetting 7.8 million tonnes per annum of LNG and is owned by Santos (30%), Petronas (27.5%), Total (27.5%) and KOGAS (15%).
Hughes was the gas supply director for GLNG before becoming the WestSide CEO in September.
