Quarterly Activities Report
Brisbane, April 30, 2021 AEST (ABN Newswire) - The March 2021 Quarter saw the beginning of a defining half-year for State Gas (
ASX:GAS). In January we commenced production testing the newly drilled Nyanda-7 & Nyanda-8 wells, and re-established production testing at Nyanda-4.
Quarter Highlights:
- Production testing commenced at Nyanda-7 and Nyanda-8 wells, and recommenced at Nyanda-4
- Nyanda-4 achieving up to 700,000 standard cubic feet of gas production per day
- Encouraging gas production levels at Nyanda-7 and Nyanda-8
- Commencement of civil works for drilling of Rougemont wells on new Rolleston-West Project (ATP2062)
Logs of the Nyanda-7 provide further positive data for future gas production, with approximately 38.2 metres of net coal confirmed (compared with 30.9 metres at Nyanda-4), with numerous open fractures apparent through the coal seams. Since the commencement of production testing the well has produced nearly twice as much water as did Nyanda-4 during the same period of its initial testing, with the pathways through the coals created by the open fractures the likely explanation for this enhanced production. These fractures are expected to enhance permeability and future gas production. With no offset wells to help the de-watering process (as is common for early-stage production tests) we expect Nyanda-7 will take longer for significant gas flows to eventuate. Nonetheless, it is currently producing approximately 5,000 cubic feet(cft) /day. As de-watering commonly takes between 3-6 months, we are anticipating that the well will begin to show its worth by the end of this financial year.
Gas production at Nyanda-8 is increasing and currently approaching 50,000 cft/day, and likewise, should pass the expected economic threshold by the end of this financial year.
The corehole drilling undertaken by the Company at its Reid's Dome Project has shown exceptional gas contents in deep coals. The dome structure in the geology of the area indicates natural uplift, and as a result, fracturing, of the formations. These fractures (evident in the image logs obtained to date in the wells), suggest the potential in these deep coals for not just enhanced production pathways, but also "free gas" in the fractures available to be liberated during production. This potential has been corroborated by the production behaviour of Nyanda-4. In this regard, where natural fractures were intersected in the well, production reached over 700,000 cft/day, after which production resumed at the economic rate of around 100,000 cft/day. This production pattern suggested that the free gas in the intersected fractures had been drained. We prognose that this is the rate at which gas is produced from the natural matrix of the coal. Over time, the coal should shrink through production of gas and water, enhancing permeability by connecting an increasing number of fractures. When this occurs we expect to see sustained higher production rates.
On April 7 we re-commenced production testing of Serocold-1, reducing the water level and pressure through pumping to enable gas production. The well has commenced producing measurable volumes of gas even though the water level has not yet reduced below the top of the coal - an extremely positive sign.
Whilst fully appraising PL231 is important, particularly given the urgent need for more east coast gas in 2023 (as the ACCC has observed), the additional contribution from the Company's new Rolleston-West Project (ATP 2062) could define State Gas as a meaningful participant in the Australian Gas Market.
On April 29, the civil works within ATP 2062 necessary to provide access to the Company's two proposed Rougemont wells commenced. The target formation for the Rougemont wells is the Bandanna Coals, which have proved economic (even without the geological advantages of plunging noses) to the north and south of our acreage. The Rougemont wells will be logged and tested to determine the thickness and permeability of the coal seams, and cores will be taken to assess gas content.
Within Rolleston West we have sizeable acreage of over 1400 square kilometres (nearly 8 times the area of PL 231). Accordingly, should the core-holes prove successful ATP 2062, the Rolleston West Project will be developed as part of the development of Reid's Dome/PL 231, sharing certain infrastructure and benefits from economies of scale. We are anticipating meaningful results at Rougemont in June. What a transformation this may prove.
Financial Position
At the end of the Quarter the Company had cash at bank of $6.27m, after expending $6.14m in Project development costs, and $0.07m in other costs.
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https://abnnewswire.net/lnk/RYLWWHKN
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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