Oil and gas exploration firm Strike Energy has signed an agreement with Wesfarmers subsidiary CSBP to convert its gas supply option to a firm 100 petajoule (PJ) gas offtake arrangement at a rate of 25 terajoules/day (TJ/d) over a period of 11 years.

The gas supply will come from Strike’s proposed Phase One development of the West Erregulla gas field located in the Perth Basin of Western Australia.

According to Strike Energy, the gas supply will provide cash flow to assist in financing and reducing capital costs of the expected Phase Two development programme.

The offtake agreement is, however, subject to a final investment decision (FID) on the West Erregulla project. It is expected that the gas deliveries will commence during the first half of 2022.

Strike Energy managing director and CEO Stuart Nicholls said: “The conversion of the CSBP offtake option to a firm gas supply agreement is another important milestone for Strike as we execute our Perth Basin development strategy.

“Delivery of gas into this contract will see Strike generating strong free cash flow from 2022 to support organic growth via development and exploration activities throughout our Perth Basin portfolio.

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“CSBP is a high-quality foundation customer, which has supported Strike since the discovery of this resource. The supply agreement meets Strike’s primary objectives of producing affordable and competitive energy for Western Australian businesses, with a key focus on WA domestic products.”

In May, Strike Energy received support from the West Australian state government for its planned development of the West Erregulla discovery.

In February, Strike Energy announced the progression of appraisal and pre-development activities at the West Erregulla gas field.