On financial footing as we progress the construction of South Erregulla. Collectively, this positions us well as we lead into the end of the financial year. Now, in relation to the CEO, in late January, we selected an executive search firm. Can you just change the slide, Emma? From that process, we've received some really high-caliber candidates. Progress has been very strong to the point where we expect to make an announcement to the market by mid-May. Thereafter, we expect the CEO to start reasonably soon thereafter. On the strategic review, we also started that work in January, and we recruited Oliver Wyman to support us. Our intent is to share the outcomes of the strategic review with the new CEO because it's incredibly important that they're comfortable with those findings and that they can support them in the delivery.
Thereafter, the next steps is we will share that with the market more broadly. This quarter, we also completed the acquisition of the 3D seismic data of the Erregulla Deep and the northern part of West Erregulla. This data will complement our existing understanding and support the assessment of the commercial development options for West Erregulla. West Erregulla has formed a key part of the strategic review, and we've assessed multiple development options on how we can best monetize those reserves. Pleasingly, both Strike and Hancock are working to develop West Erregulla to meet expected market demand. It is then prudent to talk about the role of gas in the WA energy market and its increasing importance. On the demand side, we see that gas is essential for power and industry, whether it's domestic use, mining, or industrial feedstock.
We also see gas is very reliable and flexible, providing renewable penetration or supporting the renewable penetration and grid stability. There is also very clearly rising demand for gas in WA, whether that's driven by mining, industrial expansion, and also electrification. What's also pleasing to see is both the state and the federal government see gas as a cornerstone of the energy transition. On the supply side, though, what we're actually seeing is declining gas reserves. There's been a lack of investment, which has led to an 81% reduction in oil and gas drilling since 2007. Not surprisingly then, we're seeing AEMO forecast an energy shortfall in 2027, and then it exacerbates in 2030 when the state government intends to switch off the coal-fired power generation. At that time, we see about a 6% increase in supply gas demand.
From a Strike perspective, we're very much committed to supporting the state government through this process or the energy transition, and that support will come in the form of gas-to-power developments and also the development of our assets in a very timely manner. Moving on to South Erregulla, and what we can see in the slide here is the visible progress that happened on site. For context for you, the engine room size or the shed that's going to go over the engines is about 150 by 22 meters. We're taking a really disciplined approach because what we want to do is manage the execution risk under the construction phase. In doing that, we've completed the internal handover from the Strike development team to the Strike construction team.
We've awarded and executed the majority of our major equipment packages such that 50% of the CapEx is locked in through fixed-price contracts already. We've also undertaken an independent review to confirm our execution readiness, and that came up with a couple of very minor findings. The last thing that we've done in the last quarter is we've incorporated or made sure we've incorporated the Walyering construction lessons learned into the process for South Erregulla. We are on track to deliver the power station to be online for the 1st of October 2026. In that first year of production, we anticipate AUD 18 million in revenue from the capacity credits. That revenue will be supplemented when we turn the gas engines on and generate electrons. This slide underscores why Strike has chosen an integrated gas-to-power concept for South Erregulla.
It's a vertically integrated model, and Strike controls the complete value chain. It's a little unusual to see someone control that whole value chain, but it's certainly beneficial. The power plant itself is going to be located on the Precinct, which, as you know, is Strike-owned land. It's also going to be located on top of the gas reserves at South Erregulla. Because of this, we've negated the need to build gas pipelines, and we also don't have to build a gas processing plant, which is what you'd typically see in a traditional model. The reason we don't have to build a gas processing plant is there's only a small amount of work that needs to be done to align the gas spec to feed into this feedstock gas into the power plant.
This avoidance of major capital has made the economics much more attractive, and it's actually saved us tens of millions of dollars. The other thing that this model does, it gives us a lot of operational flexibility. We've got no take-or-pay contracts for pipelines in terms of gas storage, or we've got no take-or-pay obligations under a gas sales contract. What that does, it gives us a lot more flexibility on how we operate the plant because we don't have to manage the operation within the constraints of those take-or-pay contracts. Collectively, these attributes mean that this power plant is the lowest-cost gas producer of electricity in the SWIS, the South West Interconnected System. That's because we've removed significant OpEx and CapEx in this model.
It's also enabled us a shorter time to start up, so not having to build the gas processing plant or the pipelines has condensed that period. We also have a lower carbon intensity relative to traditional gas generation, and we also deliver the greatest value per molecule of gas. At AUD 140 a megawatt hour, the look-through gas price is AUD 28 a gigajoule, and that does include the capacity credits. Now, touching on the financials for the quarter, Walyering remains a reliable gas generator. Production's been steady at 25 TJ a day, which has meant that we've been able to fulfill all of our gas nominations. Sales revenue was up around 6%, and the reason for that is we had an advantageous foreign exchange, and in this quarter, we didn't have the annual planned maintenance shutdown.
Subsequent to the quarter, we've met our conditions precedent for the first tranche of the Macquarie facility, which enables us to progress the South Erregulla. Looking ahead, we remain very focused on finalizing the CEO recruitment process and the strategic review outcomes, and that does include the capital allocation framework to provide guidance on the development pathways for all our assets. We're going to continue to be very focused on the South Erregulla gas peaking plant, and some of the key activities that we'll be undertaking this quarter is the concrete works for the gas engines, the factory acceptance testing, again, for the gas engines. Those engines are currently located in Austria, so they have their factory acceptance testing prior to shipping to Fremantle. We'll also award the transmission line and switchyard erection works.
We will interpret the Natta 3D seismic and the next steps for West Erregulla, and we will also maintain our operational reliability at Walyering. In summary, we're entering a period of important execution with near-term milestones that set us up for long-term value creation. On that note, I'm going to hand over to Emma to host the Q&A. Thanks, Emma.
Great. Thank you. Apologies, everyone. It's a slide stop there. My computer had a little bit of a freeze-up. Took a while to catch up. Now, we've got Dale Koenders, who if you'd like to unmute Dale and ask a question.
Yeah, morning. I just wanted to confirm the writing on page three. You've said Strike's assessing a range of development pathways for its share of West Erregulla and Erregulla Deep. Are you looking at a sole risk option as well as another development case with your JV partner?
Sorry, I could not hear that question properly. Would you mind repeating it? I only heard part of it.
On page three of the release, you've stated that Strike is exploring developing its share of West Erregulla and Erregulla Deep resources. I just wanted to confirm that you're looking at a sole risk development, or are you only looking at development cases with your joint venture partner?
Okay. Thank you. We're looking at a range of development options for West Erregulla . What we're focused on is the highest value accretive pathway for Strike. We've looked at all options and how we would monetize that. That clearly does include working with Hancock, and we've looked at what we can do as Strike. Yeah, everything's on the table, and we've looked at all options.
Can you give any color as to what a sole risk development would look like if Strike was to develop only its own reserves?
No. No. That's not something that I can give any color on.
Okay. There may be a second other question then. Just in terms of the high-caliber CEO candidates, what is the board looking for in the new CEO? What are the key characteristics that they'd like to bring?
Sure. We have been really impressed with the high-caliber candidates that have been presented to us. Some of the attributes that we have been looking at is clearly having an understanding and working in the energy sector, including oil and gas. Ideally, previous CEO experience would also be helpful. The other thing is around the style of the CEO candidate. Working with our stakeholders, we have got multiple stakeholders. Having a personality that builds those relationships and can execute Strike's strategic review are really important to us.
Thank you.
Thanks, Dale. Might hand over to Declan Bonnet from Euroz.
Yeah, thanks, Emma, Jill. Just on slide five of the presentation, the blob in between the West Erregulla field and the Erregulla Deep field used to be pink, so classified as a gas field, but now it's yellow, classified as a prospect. Is it reading too much into it that the 278 petajoules that you speak to regarding the prospective resource for Erregulla Deep is too high now, or is that still part of the discovery, or has that been excluded now?
Yeah, I'll take that one, Dec. That is probably reading a bit too much into it. There's just several iterations of maps, some of which are JV endorsed in places. The note on that map is that they're STX interpreted leads and prospects. I wouldn't read anything into the volumes there. We haven't interpreted anything from the Natta 3D that's come through yet.
Okay. Thank you. Maybe just a quick follow-up question. On Ocean Hill, I note that a couple of the rigs have left the basin. What do you think potentially the quickest timeline for getting that drilled over the next 12 months could be?
Yeah, sorry. I'm struggling to hear a little bit. For Ocean Hill, what we've done is we've confirmed what our first drilling target would be, and we've had that independently verified. I understand that there is one or two, at least one rig that's still available in the Perth Basin, but at best, we'd be able to drill that well at year-end, but that would assume an immediate securing of that rig. Your sentiment is right, Declan. If the rigs leave the region, then that does make it more challenging because you're going to have to mobilize a rig back to the Perth Basin.
Excellent. Thanks for your time.
Thanks, Declan. Hand over to Henry Meyer from Goldman Sachs.
Thanks, morning all. It seems that the optimal development plan for West Erregulla will also depend on your JV partner's drilling results they've completed over the last few months as well, and how they'll be looking to optimize their portfolio. Could you share what key milestones you're looking to within the JV as you work towards a development plan there?
Yeah. Clearly, with Hancock Energy procuring mineries, they've been looking at their development options. It comes as no surprise that Strike has also been looking at our development options. I can't share detail in terms of a lot of things are commercial and confidence, but what I can say is the relationship is, from Strike's perspective, much more productive. Examples of that is the team worked really well together in relation to 3D seismic survey. We're both working towards commercializing West Erregulla for the expected market demand, and you can look at the AEMO forecast around when that market demand becomes available. Our objective is to work with Hancock Energy to commercialize West Erregulla.
Okay. Thanks, Jill. At South Erregulla , could you just add some color onto what components of the CapEx are fixed beyond the gas compressors and how you're planning to manage any risks related to the remaining variable CapEx through the development?
Sure. When any project moves into construction, managing execution risk is critical. We have the leasing component of Macquarie, which is for the Jenbacher gas reciprocating engines, and we have awarded a number of the major equipment packages. In fact, I think we have only one or two left to do. That is why we have locked in 50% of the capital for South Erregulla. The variable component really becomes when we are on site and we are talking about labor. At this stage, as I say, most of the equipment packages, what is not locked in is pretty much equipment that you can get off the shelf. We do not expect significant price variation for the residual equipment. I hope that answers your question.
It does. Thanks, Jill. Maybe just to expand a little bit, if labor is one of the bigger risks, could you just share any views on how you'll be managing that through the project? Have we got a contractor locked in already, or still work to do there?
Sorry, I didn't catch the first bit of your question. Sorry, the sound is not great. Can you repeat the first part of the question? Sorry, I just didn't hear it.
Sure. Sorry. If labor is the biggest risk to variable costs, could you just share any detail on whether contractors have been locked in, yes, or how you'll be managing that over the next 12 months?
Yeah. I'm not sure that labor is the biggest risk to construction. It's clearly the variable part of the cost profile for the project. A lot of our contracts are already locked in for the labor component. I think more importantly, as we do have some contingency in the schedule, we do plan to downman a little bit around the Christmas period because that's a time when it's harder to get people to come to site. At this stage of the project, we're not worried around having sufficient labor to execute the project. A lot of the project is actually going to be constructed off-site, and then we move it to site. We'd start the erection of the engine shed very shortly, and what we will do is move through the project in a staged process.
It is not like all the engines arrive on site at the same time. They arrive progressively, and they are assembled on site as they arrive. The whole thing is a sequence in terms of how those engines go into the engine shed.
Sorry. We might hand over to Stuart Howe now from Bell Potter.
Yeah. Hi, Jill. Hi, Emma. Just to go back to West Erregulla, I think previously we thought that we'd see a field development plan update and AGIG tariff for the processing plant, and then the joint venture would take FID. It looks like now there's a bit of uncertainty around that, and you've addressed that. Just looking at the AEMO data, the supply-demand forecast, you made a comment earlier that you wouldn't bring that online until you saw, I guess, a sufficient supply gap emerging. I guess if you're looking at the chart that you provided in your presentation, is that the gap we sort of see in 2028, or is it the one later in the decade? To what extent do you think AEMO has West Erregulla supply in its forecasts?
Okay. If I take the last part of your question first, I'm not sure whether West Erregulla has—oh, sorry, AEMO has West Erregulla in their forecast. What they do is they talk to all their stakeholders, and they build their forecast from a bottom-up basis. Where West Erregulla specifically sits in the AEMO forecast, I'm not sure. What we do plan to do, though, as Strike, is we recognize that there is an energy gap in WA, and we plan to help fill that through the gas-to-power as well as further gas processing. AEMO updates its forecast regularly, and we are looking towards around that gap around 2027, 2028 in terms of when we can next fill it with our next gas processing.
Perhaps just to follow up, it feels like there's a lot of commentary in the, a lot of language in the presentation and release around vertical integration. I know you've sort of said all options are on the table for West Erregulla. Can you perhaps just speak through some of the options you've got at the top of that list?
Sorry, I didn't catch all of that question. I'm sorry. I'd have to ask you again.
Just relating to the commentary in your releases today relating to vertical integration, obviously taking part in electricity generation in the context of West Erregulla , I just wonder if you could talk to some of the options you've got on the top of your list. When you say you've looked at all options, just perhaps the top couple of development scenarios that you're considering.
Yeah. It is similar to what we have done for all our assets as part of the strategic review. We have looked at how we can optimize the value of each of the assets. For West Erregulla , clearly, we have the Precinct. We have been looking at how we optimize the value of the Precinct. Could you build a gas processing plant there? You can also build it on the existing acreage. We have also looked at power. What we have tried to do is be creative in terms of how we optimize the value of that resource. The actual outcomes of that would be shared as part of the announcement of the strategic review.
Great. Thank you. That's all from me.
Cool. Unless any of the analysts have any further follow-up questions, I think we'll leave it there for today. I'll reiterate that we would like to see your questions on the hub if you feel they haven't been addressed, and we'll answer as many of them as we can.
Thank you.
Great. All right. Thank you very much, everybody.
Thank you.
Thanks, Jill.