Orica-Strike Energy Deal Set

Industrial giant Orica has struck a gas supply deal with Strike Energy today, in a bid to look for non-grid power solutions in its operations.

Orica’s payments to Strike will help fund for the gas project that the latter will set up in the Cooper basin.
According to reports, payments to be made by Orica are expected to reach up to $52.5 million or the equivalent of 150 petajoules of gas, which Orica would need.

The deal has been received with much enthusiasm from investors in Strike, which drove stocks to a 20% climb.

But Orica’s shares, meanwhile dropped to 46 cents, owing to the fact that it Strike may likely be able to deliver gas by 2016. Orica, however, is confident that Strike will be able to build on its Cooper basin project, which will then bring than the price of gas significantly.

Says Orica’s head Ian Smith, “This agreement has the potential to provide a future new source of gas supply to our Australian east coast manufacturing plants at an affordable price.”

Analyst compares the Orica-Strike Energy deal to a similar business arrangement Alcoa has made with ASX’s Empire Oil and Gas. The latter will supply Alcoa for its Perth project in the Red Gully.

So far, the Red gully has been producing and delivering slowly, even as BP needs to condensate Empire’s Kwinana refinery.

Meanwhile, Fortescue Metals Group is also reportedly considering selling its stakes to oil and gas companies in order to fund its operations in Pilbara, where Fortescue Metals Group runs an iron ore plant.