(MENAFN - ProactiveInvestors - Australia) WHL Energy's (ASX: WHN) La Bella gas field has had its economic potential enhanced by a report indicating that domestic gas prices in Eastern Australia were continuing to escalate.
The National Institue of Economic and Industry Research's report into the Australian gas industry found that contracts for long-term domestic gas supply had "evaporated" due to export commitments.
Domestic users were instead being offered gas at prices linked to East Asia's LNG market, the highest priced gas in the world.
Furthermore, current gas production and proven reserves will need to expand dramatically in order to support the expansion of liquefied natural gas export projects.
WHL managing director Steve Noske said: "The strengthening of the Eastern Australia gas markets since acquisition of the La Bella gas field and surrounding prospects in May this year is a strong endorsement of the Company's strategy.
"WHL Energy is preparing the project to take advantage of this favourable economic climate with the goal of establishing a secure, long term, gas reserves and production base and potential early cash flow as part of our long term growth strategy."
The La Bella field in VIC/P67 holds Best Estimate (2C) Contingent Resources of 158 petajoules.
With major gas producers such as Santos stating that Eastern gas prices are expected to more than double from 3 to 4 per gigajoule to between 6 and 9 per gigajoule, the La Bella could have conservative net present value of A75 million at current gas prices of A6 per gigajoule.
This value could more than double to over A140 million if gas prices increase to A8 per gigajoule.
WHL is currently in the process of farming out VIC/P67 and the likelihood of a higher price gas market is a distinct draw for potential partners.