Australian oil and gas producer Senex Energy has agreed on a deal with fellow Australian company AGL for the supply of gas.

Australia’s largest power company, AGL will purchase 42 petajoules (PJ) of gas from Senex in January 2025. The gas will come from Senex’s prospective Atlas expansion of its Surat Basin gas field.

Ian Davies, Senex CEO, stressed the importance of the deal, stating: “The [Australian Competition and Consumer Commission] and Australian Energy Market Operator have forecast structural gas shortfalls in the east coast market without new supply in the coming years and have warned of the urgent investment needed to ensure enough supply.”

The Atlas field expansion will provide a 50% expansion of Atlas’ gas production, increasing the field’s yield up to 18PJ per year. The facility is Australia’s first field solely designated towards domestic gas supply.

Senex was awarded land for the field’s expansion and invested $708m (A$1.03bn) to increase both this and the nearby Roma North field. In total, the two are expected to increase Senex’s overall production by 60PJ per year by 2025. This would meet  more than 10% of yearly energy demand on the country’s east coast.

Davies also noted the importance of Atlas’ gas production in supporting the energy transition. “Gas plays an essential “firming” role for renewable generation by providing fast and reliable electricity to support intermittent, or “non-firm”, solar and wind generation.

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“Gas is the critical safety net, maintaining the stability of the electricity grid and supporting Australia’s manufacturers as the road to net zero becomes increasingly complex,” Davies added.

The expansion of the two projects has been beset by issues, however. Expansion of the two fields was halted in December of 2022 as a response to the Australian Government’s legislation aimed at controlling rising energy prices. The projects are still suspended and the supply deal with AGl hinges on the timely completion of the work at Atlas.