Emerging gas producer Blue Energy (ASX: BLU) has secured a memorandum of understanding to supply gas from its Sapphire pilot well in Queensland’s North Bowen basin to West Australia-based independent power producer Nomadic Energy.
Under the terms of the agreement, gas which would ordinarily be sent to flare from Sapphire will be used by Nomadic to generate power for its industrial customers.
The gas will be supplied over a two-year period at 0.5 terra joules per day consistent with early pilot testing phases of coal seam gas projects.
Power generation equipment costs will be covered by Nomadic.
Sales to Nomadic will commence once the Sapphire pilot well, located in the ATP 814 permit, reaches the requisite daily flow rate.
The project will reduce greenhouse gas emissions from the Sapphire pilot testing activity through the utilisation of the produced gas for onsite power generation.
Blue Energy and Nomadic are working towards finalising the terms and binding documentation for the supply agreement.
Timely fit
Blue Energy managing director John Phillips said the deal was a timely fit for the company.
“This agreement provides an elegant solution which will help us avoid the need to flare early-stage pilot test gas commonly associated with these types of pre-development activities,” he said.
Appraisal program
Blue Energy kicked off an appraisal program of the Sapphire Block in July, with the aim of converting gas resources to reserves and establishing flow capacity for existing 10-year supply agreements with EnergyAustralia and Origin Energy (ASX: ORG).
These agreements entail the supply up to 400 petajoules of gas at Wallumbilla Gas Hub in Queensland for the domestic market.
Blue Energy has a further 2,500PJ of resources for ATP 814, which remain uncontracted.
ATP currently has 2P reserves of 71PJ and 3P reserves of 298PJ, with contingent resources of 3248PJ.
Earlier this month, Blue Energy announced the second lateral well of the appraisal program (Sapphire 5L2) hit its target after drilling over 1,100m into the coal seam.
The company also intersected the Sapphire 5V vertical well as planned.
