End of Year Update
Brisbane, Dec 20, 2022 AEST (ABN Newswire) - State Gas Limited (
ASX:GAS) (STGSF:OTCMKTS) is pleased to provide an update on a series of matters prior to the end of the 2022 calendar year.
Response to regulatory intervention
The Company's Board of Directors and management believe that its recently announced CNG Project is unaffected by the $12/GJ gas price cap and its underlying project economics remain attractive. In particular, the Company's CNG production is currently planned to be sold into the spot market - which is not governed by the announced price cap and, moreover, project operating costs are estimated to be less than $12/GJ.
Notwithstanding these project-specific positive commercial drivers, State Gas stands with other resource industry participants and commercial leaders in Australia in challenging both the intent and approach of the regulatory intervention in the gas industry. This intervention allows the government to dictate the contracted price of gas for the next 12 months and significantly influence it thereafter.
As pointed out in our submission to the consultation process on 13 December 2022 (attached as Appendix 1*), we believe that these actions will have a significant negative impact on investor sentiment in the energy sector and perversely exacerbate the existing challenges of reliable energy supply.
In our view, it is supply-side factors which are driving the price of domestic gas and the implementation of pricing caps will not alleviate that situation. State Gas will continue to lobby against this regulatory intervention as part of the wider industry response and will keep its shareholders updated on the impact of the regulatory intervention as detail becomes clearer over the coming quarter.
CNG Project
The Company continues to make good progress on achieving its deadline of delivering first gas production from its natural gas reserves located on PL231 in March 2023. As previously reported, it is State Gas' intention to compress and truck the gas to a location where it can decant the gas into existing pipeline infrastructure ("the CNG Project"). All critical equipment has now been ordered and engineering design is well progressed to allow in-field construction and commissioning to be undertaken during February 2023.
The CNG Project will initially produce nearly 1TJ of gas per day, which State Gas intends to sell into the spot market. As noted above, the Company is strongly of the view that the proposed regulatory intervention will result in increased volatility in spot market activity with positive price effects. State Gas Directors and management remain of the view that the CNG Project is unaffected by the $12/GJ gas price cap and underlying project economics remain attractive.
Rougemont Well Production Testing
As advised to the market on 23 November 2022, State Gas has commenced production testing of the Rougemont-2 and Rougemont-3 well pair. De-watering activities have commenced after the successful completion of two lateral Rougemont 3 wells which connect with the vertical Rougemont-2 well. These interconnected wells provide direct access to ~ 2,400 metres of Bandanna coals, a formation under commercial production in the nearby Arcadia Valley.
The production test is being undertaken to confirm the gas production potential of the Rougemont area within State Gas' 100%-owned Rolleston-West Project (ATP 2062). As a positive early indicator of permeability, water production has exceeded initial expectations and the Company is therefore confident of encouraging gas production results as testing activities continue over the next three months.
*To view tables and figures, please visit:
https://abnnewswire.net/lnk/779Q965D
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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