Independent oil and gas company Apache has signed a contract to supply natural gas from the Reindeer Field to CITIC Pacific's Sino Iron project which is under construction at Cape Preston, in Western Australia's Pilbara region.

Apache said that the company and its Reindeer joint venture partner Santos have agreed to supply 154 billion cubic feet of gas over seven years beginning in the second half of 2011. Apache owns a 55% interest in the field and Santos owns the remaining interest.

According to the company, the gas will be supplied through a 65-mile offshore pipeline and an onshore sales gas processing facility at Devil Creek, about 28 miles southwest of Dampier, with capacity to process 210 million cubic feet of gas per day. The company plans to sell additional production from the Reindeer field to other domestic customers in Western Australia.

The contract price for the first three years is a fixed price adjusted periodically for changes in the Australian consumer price index. Beginning in the fourth year, the price is indexed to international oil prices. At an oil price of $50 per barrel, Apache’s net share of the revenue over the seven years of the contract would be approximately $700 million.

The gas sales agreement will not take effect unless Apache and Santos sign contracts for engineering and procurement of the gas plant and pipeline by mid-March 2009, or a later date if agreed by all parties, said Apache.