Blue Energy not blowing smoke with new Queensland pilot gas MOU

Coal seam gas producer Blue Energy (ASX: BLU) and battery metals project developer Queensland Pacific Metals (ASX: QPM) have identified a strategic plan to fuel critical new projects with gas that is currently being burnt off in a pilot well program.

The two have signed a non-binding MOU which could see Blue Energy supply Queensland Pacific Metals (QPM) and its wholly-owned subsidiary Queensland Pacific Metals Energy Pty Ltd’s (QPME) recently acquired Moranbah Gas Project (MGP) plant with pilot program gas.

New fuel for Moranbah Project

Gas which is currently being flared as part of a government approved pilot test program will now be available to be supplied to the Moranbah Project from Blue Energy’s nearby Sapphire Block PL 1034.

The Blue Energy gas is also in line to potentially fuel QPME’s TECH battery metals development project in Townsville.

Both companies have identified the MOU as the first step in a growing collaboration between Blue Energy and QPME for the development of gas reserves in the North Bowen Basin.

Blue Energy already has an MOU in place with QPME’s parent company QPM covering the supply of 7 petajoules (PJ) per annum of gas over 15 years to QPM’s Proposed Nickel Refinery in Townsville.

For Blue Energy the deal will provide it with a strategic opportunity to earn money from the pilot campaign underway at Sapphire Block permit ATP 814.

The company’s managing director, John Phillips, said engineering activities to identify the mechanics and logistics of tie in points and transfer points for the delivery of the gas are about to commence.

“Blue is delighted to be able to offer our pilot gas to QPME in the near term on an as available basis. This will ensure Pilot gas produced by Blue is fully utilised and can assist QPME in meeting its gas supply targets on becoming the new owner of the MGP,” he said.

“It allows Blue a very cost-effective path to bringing more new gas supply into the domestic market, efficiently, cost effectively and in a timely manner. Blue looks forward to working constructively with QPME to fully realise the potential of the North Bowen Basin gas resource.”

Pilot testing progresses

In early May, Blue reported that it was continuing to increase gas flow at the Sapphire Pilot program, with rates climbing up from 100,000 cfd (cubic feet per day) to 140,000 cfd.

The Pilot well drilling and production testing campaign was designed to increase Blue’s Sapphire gas reserve base by upgrading 3C resources to 2P reserves.

Geological data from the drilling phase will be included in an independent reserve assessment being undertaken by leading certifier Netherland Sewell and Associated Inc of Dallas (NSAI).

Data from the reserve and flow rate programs will be utilised in assessing the size of any future Sapphire Field Development.

Utilising waste gas to power new projects

QPME chief executive officer David Wrench said the new MOU is consistent with company’s aim of collecting waste gas from the North Bowen Basin that would have otherwise ended up as smoke in the atmosphere and diverting it to productive industrial use.

“This opportunity with Blue is one of several near-term opportunities which QPME is working on to get cost-effective gas into the Moranbah infrastructure system to increase overall production. As soon as we take control of the Moranbah Project, we plant to execute and implement these opportunities expeditiously,” Mr Wrench said.

Moranbah Gas Project acquisition

In early April, QPM revealed that wholly owned subsidiaries of QPM and QPME had entered into a conditional agreement to acquire 100% of assets from the Moranbah Gas Project and North Queensland Energy Joint Venture (NQE) from the Arrow Energy Group and AGL Energy Ltd.

At the time, QPM said that deal offered an opportunity to obtain an established coal mine waste gas project with production, 240 PJ of 2P reserves and existing infrastructure with processing capacity of up to 30 PJ per annum.

TECH nickel processing opportunity

That gas could then be utilised as a long-term gas supply for the Townsville Energy Chemicals Hub (TECH) project.

TECH, which is being developed as a battery materials refinery, will process imported, high-grade laterite ore from New Caledonia to produce nickel sulphate and cobalt sulphate, along with other valuable co-products.

In mid-May QPME confirmed it had been awarded $5 million from the Australian Federal Government under Tranche 2 of the Critical Minerals Development Program.

That cash injection is helping to accelerate Front End Engineering Design for the TECH project, which will be undertaken by lead engineers Hatch.