Echelon Resources' Palm Valley Joint Venture has locked in a gas supply agreement with the Northern Territory government, enabling drilling of two new wells to restore production capacity by mid-2026.
- Gas supply agreement for 10.5 PJ through 2034
- Two new wells to restore 15 TJ/day Palm Valley capacity
- Ensign 974 rig contracted for mid-year drilling
- Mereenie permit wells remain uncommitted
- Agreement supports long-term Amadeus Basin development
Gas Supply Deal Unlocks Drilling at Palm Valley
Echelon Resources Limited (ASX:ECH) and its Palm Valley Joint Venture have clinched a pivotal gas supply agreement with the Northern Territory government, securing the supply of up to 10.5 petajoules (PJ) of gas through to 2034. This contract not only underpins the JV’s final investment decision to drill two new wells but also revives prospects for restoring the Palm Valley production plant to its 15 terajoules (TJ) per day capacity. The deal includes take-or-pay obligations with inflation-indexed pricing, providing revenue certainty over the next eight years.
Drilling Set to Begin Mid-2026 with Ensign 974 Rig
Preparations are already underway, with the Ensign 974 drilling rig contracted and site works commenced. The targeted wells will tap the same formation as the prolific PV-12 well drilled in 2022, which had demonstrated strong production potential. Drilling is anticipated to start mid-year, marking a significant step in reactivating Palm Valley’s output and supporting local energy supply reliability.
Mereenie Wells Await Gas Sales Agreement
Meanwhile, the JV’s two wells in the Mereenie permit remain uncommitted, pending an agreement on gas sales. These wells are held as options under the rig contract, reflecting some uncertainty about their immediate development. This contrasts with the Palm Valley wells, which now have clear contractual backing and a defined development timeline.
Strategic Implications for Echelon and Partners
Participants in the Palm Valley permit OL3 include Central Petroleum (50% operator), Echelon Palm Valley (35%), and Cue Palm Valley (15%). Echelon’s CEO Andrew Jefferies framed the agreement as a boon for dependable local gas supply, emphasizing its role in maintaining power reliability across the Northern Territory, including Darwin. The deal fits within Echelon’s broader strategy of developing its Amadeus Basin assets responsibly while seeking additional value-accretive opportunities.
This announcement follows Echelon’s recent moves to streamline its portfolio, including the planned sale of its Cue Energy stake to Horizon Oil earlier this year, which may free capital for these development activities. The company’s ongoing exploration and development programs continue to validate the prospectivity of its assets, making this gas supply deal a critical catalyst for near-term production growth and cash flow generation.
Bottom Line?
The Palm Valley gas supply agreement is a clear green light for Echelon’s next growth phase, but Mereenie’s future hinges on securing gas sales contracts.
Questions in the middle?
- Will drilling at Palm Valley meet expected production targets once operational?
- What timeline and terms might emerge for the Mereenie gas sales agreement?
- How will Echelon’s portfolio reshaping impact its capital allocation toward these wells?