Central Petroleum and Incitec Pivot announce 2C gas resource for Project Range

Central Petroleum ASX CTP 2C resource coal seam gas Surat Basin
Joint venture partners Central Petroleum and Incitec Pivot are now selecting a location for a production pilot at the Surat Basin coal seam gas project.

Australian joint venture partners Central Petroleum (ASX: CTP) and Incitec Pivot (ASX: IPL) have announced a higher-than-expected 2C contingent gas resource at Project Range in Queensland’s onshore Surat Basin.

The duo today unveiled an independently certified 2C contingent resource of 270 petajoules of Walloons coal seam gas (CSG) at the project, which exceeds the original estimate of 150-180PJ of potentially recoverable resources.

This new resource estimate follows a successful multi-well exploration campaign conducted over July and August, in which four drilled wells surpassed expectations and a fifth well was not required to move forward with the production pilot phase.

According to Central, the original estimate was based on recovery from the shallower Juandah coals only, but the recent exploration results have now demonstrated that the deeper Taroom coals also have good permeability and thickness and are expected to make a material contribution to production.

The joint venture partners are now selecting a location for a production pilot to demonstrate gas flows to surface.

The drilling of multiple pilot wells is anticipated in early 2020.

Central chief executive officer and managing director Leon Devaney said the project “appears to be in a sweet-spot of the Walloons CSG fairway” and is “ideally suited to a low-cost vertical well development, which should significantly enhance project economics”.

He said the company is confident the 2C resources can be converted into 2P reserves and then into production, based on areas to the west and south-east of Project Range targeting the Walloons fairway with similar coal depths that have consistently been brought into production at substantial rates.

“Our focus is now on development contingencies rather than whether the gas will flow … We plan to address these remaining development contingencies in parallel with the production pilot so that a [final investment decision] can be accelerated,” Mr Devaney added.

Project Range joint venture

In March 2018, Central entered a 50:50 joint venture with $5 billion Australian fertiliser company Incitec to develop a natural gas project to support the long-term viability of Incitec’s Gibson Island fertiliser facility.

Under the deal, Incitec will contribute up to $20 million of exploration and appraisal costs, including the production pilot.

A 77sq km exploration permit, now called Project Range, was granted in August.

The joint venture was followed by the inking of a gas sales deal in June, in which Central agreed to deliver at least 20 terajoules of gas per day to Incitec’s plant in Queensland via the Northern Territory’s northern gas pipeline.

Contingent estimate

The contingent resources were independently certified by Netherland, Sewell and Associates, which has been conducting resource evaluations in the Walloons CSG play for more than a decade.

The certifier estimated the original gas-in-place to be 432PJ, with the 2C resources representing a recovering factor of about 63%, which is typical for Walloons coals in this depth range, Central reported.

There are currently no reserves or prospective resources booked in Project Range’s permit.

Central said given the Walloons play at this depth has a history of success, there are no contingencies relating to the coal properties or the application of technology that prevent the resources being classified as reserves.

The 2C resources are only contingent on the finalisation of development plans, marketing terms, development of infrastructure and commitment to develop the resources.

Danica has extensive experience writing and editing business news in the Oceanic and Southeast Asian regions. She has written across a range of industries including oil and gas, mining, energy, science and research, retail and travel. Danica has covered small and large cap companies listed on the Australian, Singapore, Hong Kong, Indian, London and Toronto exchanges.