Echelon Resources Secures Gas Supply Deal for Rare Earth Mining in Australia
Echelon Resources, a Wellington-headquartered oil and gas exploration firm listed on the Australian Securities Exchange (ASX), has signed a significant contract to supply gas for rare earth mining projects in Western Australia. The deal, inked with the Northern Territory Government, enables Echelon to provide gas from its Mereenie joint venture field until 2030. This agreement will also fund the drilling of new wells, according to CEO Andrew Jefferies.
The gas supplied by Echelon will be utilized by Arafura Rare Earths for its mining operations, which require high-quality gas to achieve the high temperatures necessary for mineral processing. Jefferies explained that electricity alone cannot provide the intense heat needed for processes like lithium extraction. "There is a burgeoning demand for gas in Australia," he noted, highlighting its critical role in supporting the mining sector.
Australia's Department of Industry, Science and Resources released a Future Gas Strategy in May, emphasizing the need for reliable and affordable energy to maintain the country's competitive edge in resources and standard of living. The strategy underscores the importance of gas as a transitional energy source as Australia moves towards net-zero emissions. This aligns with Australia's critical minerals strategy, which includes substantial funding to boost projects related to clean energy technologies, such as lithium production.
Jefferies stressed the importance of gas as a backup to renewable energy sources, particularly in light of recent energy cost surges. Rising energy prices have already led to operational reviews and shutdowns in other industries. Methanex, for instance, is reassessing its Taranaki operations, while facilities in Ruapehu have temporarily closed due to a nearly 600% increase in energy costs since 2021.
New Zealand has faced challenges in the oil and gas sector, exacerbated by a 2018 ban on offshore exploration permits. Jefferies described the exploration industry as "decadal," requiring long-term commitment despite recent setbacks and policy challenges in New Zealand. He noted that significant investment in the upstream sector has not yielded expected returns, leading to difficulties in maintaining operations.
Echelon Resources recently departed the New Zealand Exchange (NZX) after decades of presence, retaining only a 4% stake in the Kupe field. The company's shift to the ASX places it among more than 60 firms involved in mining and exploration. Jefferies emphasized that while Echelon now focuses on exploration outside New Zealand, it remains headquartered in Wellington and continues to identify as a New Zealand company.
