Blue Energy readies for 2022 drilling program in Bowen Basin amid global gas supply concerns

Blue Energy ASX BLU gas basins Beetaloo McArthur Galilee Bowen Queensland Northern Territory
Blue Energy’s Moranbah project in the Bowen Basin has 3,248PJ of contingent gas resources.

With domestic supply agreements locked-in and gas resources ready to develop, Blue Energy (ASX: BLU) is preparing for its 2022 drilling program which is due to start in June.

The company’s upcoming drilling program aims to prove up 2P reserves to underpin the Moranbah to Wallumbilla pipeline interconnect and supply agreements.

In Queensland’s Bowen Basin, Blue operates the Moranbah project and has firmed up 3,248 petajoules of contingent gas resources.

Gas pipeline

The federal and Queensland governments recently completed a concept study, which confirmed the Bowen Basin was in a prime position to feed gas to Australia’s east coast market.

As a result, the basin has been prioritised for infrastructure to connect it to the east coast gas grid with governments processing expressions of interest to get the pipeline to a final investment decision.

“[Bowen Basin] provides a de-risked new gas supply basin, which has large-scale volumes, which have been on production for over a decade (and therefore de-risked), and which principally only requires the construction of a pipeline to initiate significant gas development,” Blue managing director John Phillips said.

The Bowen Basin has about 30 years’ domestic east coast gas supply. Blue noted the basin just needs connection to market and operators to develop their projects.

Offtake agreements

Government support has assisted Blue in securing long-term agreements to supply gas from its proposed operations.

The company has signed a non-binding agreement to supply Energy Australia with 100PJ of gas over 10 years.

Blue has also inked a similar non-binding contract to supply Origin Energy (ASX: ORG) with 300PJ of gas in the same timeframe.

This gas will be delivered to the Wallumbilla hub in Queensland.

Blue also has two non-binding memorandum of understanding agreements covering the Townsville market.

One is to deliver 112PJ gas over 15 years from Blue’s Bowen Basin permit to with Queensland Pacific Metals’ (ASX: QPM) proposed Townsville nickel processing facility.

In the second MoU, Blue has agreed to work with North Queensland Gas Pipelines to establish further offtake agreements in the Townsville market.

Additionally, Blue is in ongoing discussions with “several other large east coast gas users”.

Drilling in the Bowen Basin

In readiness for drilling to begin in June, Blue is designing wells, securing approvals and engaging contractors.

The company plans to spud and drill the Sapphire wells first followed by the Lancewood and Central wells in the September quarter.

Surat Basin

Over in the Surat Basin, which is also in Queensland, Blue holds 100% of ATP854P.

In late January the company unveiled a 300% upgrade of recoverable gas resources for the permit – from 101PJ in contingent resources (3C) to 398PJ.

The permit is “near the heart” of the gas supply precinct with gas pipeline infrastructure that connects Wallumbilla to Gladstone running through the holding.

Additionally, Blue noted ATP854P has substantial gas resources to augment its supply agreements with Origin Energy and Energy Australia.

As well as its Bowen and Surat basins, Blue also has permits in the Galilee (central west Queensland), Greater McArthur (Northern Territory), and Cooper (Queensland) basins.

Oil and gas prices rocket

Blue’s news comes amid rocketing oil and gas prices – driven by a recovery from the pandemic and Russia’s Ukraine invasion.

Brent crude oil is currently fetching over US$120 a barrel, meanwhile gas prices are also spiking propelled by tight supplies and no new near-term capacity.

The price of LNG, Asia is attracting more than U$35 per million metric British thermal unit.

With major European economies reliant on Russian gas and other energies, supply concerns have been heightened.

Back in Australia, gas prices on the east coast are not expected to drop – indicating strong domestic and international demand.

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