Empire Oil & Gas (ASX: EGO) and the EP 389 Joint Venture has executed a non-binding term sheet with Alcoa of Australia Limited to finalise a forward gas sales agreement (GSA) for the supply of gas from the Gingin West and Red Gully gasfields. The term sheet was signed on 10 June 2011 and the companies have an exclusive 90 day period to finalise the agreement for the gas fields located in the exploration permit in the Perth Basin of Western Australia. The company said the term sheet "contemplates a pre-payment for a portion of the gas sales where these funds will be utilised in constructing and commissioning the Red Gully Gas and Condensate Plant including condensate storage tanks and road tanker load out for condensate together with construction of the flowline from the Red Gully Plant to existing natural gas pipeline infrastructure." The distance from the Red Gully Gas and Condensate Plant to both the Dongara to Pinjarra Parmelia Pipeline and the Dampier to Bunbury Natural Gas Pipeline is 2.8 kilometres. Condensate sales to the BP Kwinana Refinery are the subject of a separate crude oil contract with BP which will provide substantial additional revenue to the EP 389 Joint Venture. Importantly, Empire Oil & Gas said the entry into a GSA with Alcoa together with condensate sales to the BP Kwinana Refinery would provide funding towards the planned 3D Seismic and drilling programs in the EP 389 permit.

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