Recommencement of Field Activities at Reids Dome
Brisbane, April 1, 2020 AEST (ABN Newswire) - State Gas Limited (
ASX:GAS) is pleased to advise that field activities are recommencing following the lengthy wet season and flooding in the region, aimed at progressing development of the Reid's Dome Gas Project (PL 231) to bring gas to market as quickly as possible.
Following the receipt of very encouraging flow rates from the Nyanda-4 well and early evidence of coal seam gas from Serocold-1 at the Reid's Dome gasfield, the current phase of the Project has been focused on production testing of the Nyanda-4 and Serocold-1 wells.
The production data is providing important data on the gas productivity of the Reid's Dome Beds and focusing plans for additional drilling and testing required for reserve certification over a large area of PL 231. The production data is also valuable as an input to work currently being undertaken with potential pipeline partners and for broader project economics and planning.
As announced on 12 February 2020, the production testing was interrupted by mechanical issues at both the Nyanda-4 and Serocold-1 wells. Prolonged and heavy rainfall and flooding in the region has also prevented access to the site, and hence delayed the recommencement of dewatering of the wells. Recent weather improvements have meant that the site has now dried sufficiently to allow access to be restored.
In recent gas market developments, a lower Asian spot price for LNG has caused downward pressure on the price of domestic gas in Eastern Australia. The Company's Board believes that this situation will be short-lived, and when industrial production in China, South Korea and Japan returns to normal (ie pre-Coronavirus levels) the price of domestic gas will rebound. Indeed, the Board's view on the looming domestic gas shortfall is commensurate with that prognosed by the Australian Energy Market Operator (AEMO) in recent days. In particular, AEMO has warned that Victoria and the southern states of Australia could face gas shortfalls by 2024 and as early as 2023.
AEMO has also advised that supply from existing and committed southern gas developments is expected to reduce by more than 35% over the next five years, despite the increase in newly committed gas projects over the last 12 months.
Recommencement of Production Testing at Reid's Dome
Accordingly, with the improvement in weather and site access, the State Gas Board has resolved to re-commence production testing at both Nyanda-4 and Seocold-1 as soon as practicable and expected during April.
The Company is highly encouraged by the early results from flow testing at the Reid's Dome gasfield. As previously advised, gas flow from the Nyanda-4 production test commenced after only five days of dewatering and reached 227 mscf/d after only six weeks, before the mechanical interruption impacted downhole pressures. Providing further encouragement, the volume of water produced from the test to date is extremely low, and if indicative of future wells in the permit, should lead to lower than usual production costs (water treatment being a large component of CSG operating costs).
The Serocold-1 production test commenced on 17 January 2020 and also quickly provided indications of gas production within the first week of dewatering commencing.
These positive results and gas market dynamics have encouraged the Board to recommence production testing now that site access has been re-established (subject to potential government travel restrictions). The Company believes that the excellent initial results warrant the continuation of production tests for up-to three months to demonstrate the potential of the Reid's Dome gasfield.
Export Pipeline
While field activities were restricted during the wet season, State Gas has also progressed plans for an export pipeline from the Reid's Dome gasfield. A desktop study of potential options has been undertaken and has confirmed a viable route from the gasfield to the high pressure east coast gas pipeline network, via the Queensland Gas Pipeline (approximately 45km to the east of the field).
Discussions with potential pipeline partners have been positive and are progressing.
About State Gas Limited
State Gas Limited (ASX:GAS) (OTCMKTS:STGSF) is a Queensland-based gas exploration and development company with highly prospective gas exploration assets located in the southern Bowen Basin. State Gas Limited's mission is to support east coast energy markets through the efficient identification and development of new high quality gas assets.
It will do this by applying an agile, sustainable but low-cost development approach and opportunistically expanding its portfolio in areas that are well located to gas pipeline infrastructure.
State Gas is 100%-owner of the contiguous Reid's Dome (PL-231) and Rolleston-West (ATP 2062) gas projects, both of which contain CSG and conventional gas. The Projects, together some 1,595km2 , are located south of Rolleston, approximately 50 and 30 kilometres respectively from the Queensland Gas Pipeline and interconnected east coast gas network. State Gas intends to accelerate commercialisation of these assets through the application of an innovative virtual pipeline ("VP") solution which will see the Company transport compressed gas by truck to existing pipeline infrastructure or to an end user.
State Gas also holds a 35% interest in ATP 2068 and ATP 2069 in joint venture with Santos QNT Pty Ltd (65%). These two new areas lie adjacent to or in the near vicinity of State Gas and Santos' existing interests in the region, providing for the potential of an alignment in ownership interests across the region over time and enabling synergies in operations and development.
State Gas is also participating in a carbon capture and sequestration initiative with minerals explorer Rockminsolutions Pty Ltd in respect of EPM 27596 which is located on the western border of ATP 2062. This project is investigating the potential of the unique basalts located in the Buckland Basaltic Sequence (located in EPM 27596) to provide a variety of in-situ and ex-situ carbon capture applications.
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