AsianOil: Australia's Strike Energy enters gas power sector with FID on plant

Perth-based Strike Energy has taken a final investment decision (FID) to proceed with the South Erregulla peaking gas power station in Western Australia, moving the project into its execution phase with an estimated development cost of $137mn, the company said on November 29. The facility, designed to deliver 85 MW of firming power, aims to support the state’s transition to renewable energy while ensuring grid reliability.

The FID economics have improved since feasibility studies concluded in June, driven by increased plant utilisation and higher-than-anticipated future capacity credit pricing. The station, located in Production Licence L24 and fully owned by Strike, is scheduled for commissioning by October 2026 to coincide with energy sales and capacity credit payments.

The South Erregulla plant will connect to the South West Interconnected System via the existing Geraldton-Three Springs 132-kVa line. It will utilise gas reserves from the adjacent South Erregulla field, with 82 PJ of 2P reserves and 2C resources expected to support more than 20 years of operation at increased utilisation rates of 30%, up from earlier estimates of 18.8%.

The project has secured reserve capacity credits for the 2026-27 capacity year, with initial capacity payments valued at approximately $216,000 per MW annually, equating to $18.3mn in the first year. These payments are expected to rise towards the 2027-28 benchmark of $354,000 per MW annually, generating additional revenue alongside energy sales. Strike forecasts annual revenues of $50-55mn over the first five years, split 60% from energy sales and 40% from capacity payments.

Strike's investment case anticipates a pre-tax net present value (NPV) of $250mn and a 27% internal rate of return (IRR), both highly sensitive to plant utilisation and energy prices. Recent policy changes by Western Australia’s Economic Regulation Authority, including a 49% increase in the Energy Offer Price Ceiling, are expected to enhance revenue opportunities during peak electricity demand periods.

CEO and managing director Stuart Nicholls described the project as integral to Strike's Perth Basin Gas Acceleration Strategy. "The South Erregulla peaking gas power station provides a critical firming solution for renewable energy in Western Australia while leveraging the integration of local gas reserves with electricity infrastructure. This development underscores our commitment to supporting the state's energy transition while generating significant value for our stakeholders," Nicholls said.

The $137mn development will be funded through Strike’s expanded $217mn financing package with Macquarie Bank and free cash flow from its producing Walyering gas project. Construction includes a 10% contingency allowance, with commissioning targeted to align with the 2026-27 capacity year.

The South Erregulla facility marks Strike's entry into gas-to-power integration, leveraging proximity to transmission infrastructure and the flexibility of peaking gas power to complement renewable energy generation.

In other news for Strike, the company reported on December 4 that it had spudded the Walyering East-1 exploration well at permit EP447 in the Perth basin, some 5 km northwest of the Walyering field. The well will target the A to D Sands within the Cattamarra Formation.

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