The Queensland Government has appointed energy company State Gas (ASX: GAS) as the preferred tenderer of a large new permit area contiguous with its wholly-owned PL231 (Reid’s Dome) gas project in central Queensland.
Block 5 (also known as PLR2020-1-5 or Rolleston-West) surrounds the northern part of PL231, which State Gas is developing to meet forecast shortfalls in the east coast domestic gas market.
It contains targets which are believed to be highly-prospective for coal seam gas, and several promising conventional gas targets identified by historic seismic and drilling.
Executive chairman Richard Cottee said Block 5 covers an area eight times larger than PL231 and would be a “company-maker” for State Gas.
“This new acreage has the potential to quadruple [our] resource position, and will enable integration of activities and a unified super-gas region, providing economies of scale, operational efficiencies, and optionality in marketing,” he said.
“The existence of conventional gas – which can be more easily turned up or down – alongside coal seam gas should help [us] better meet the increasingly-volatile demand profile of the eastern seaboard gas market, as gas is increasingly used to support renewable generation.”
State Gas expects to rapidly progress permitting and move towards an Authority to Prospect in the coming months.
It has already received expressions of interest from potential customers.
Gas from Block 5 and Reid’s Dome will be exported through a planned pipeline, for which a preferred route to market is yet to be confirmed.
State Gas recently obtained Petroleum Survey Licence 2049 which crosses a section of the new permit area and will enable on-the-ground investigations of routes under consideration.
Neither permit area will be constrained by domestic market supply conditions, providing further flexibility for State Gas.
“It means the gas we produce can be sold to any market [and] nothing beats optionality in times of uncertainty,” Mr Cottee said.
“This latest petroleum land release has been well-timed to enable State Gas to contribute meaningfully in a gas-led economic recovery.”
Nyanda-4 flow rate
The award of Block 5 follows a new record flow rate from the Nyanda-4 well located to the project’s south.
The well – which commenced production testing in late 2019 – was reported to be approaching 500 million standard cubic feet per day after eight weeks of de-watering.
Sustained gas production was first achieved from Nyanda-4 after only five days of dewatering, with water production at the lowest end of the range for coal seam gas.
Gas flows have consistently increased as the water level (and associated downhole pressure) has lowered.
Mr Cottee said the gas flow and low water were “highly encouraging indicators” for a commercial project.
“We are very pleased with the excellent flow rates being achieved at Reid’s Dome,” Mr Cottee said.
“It is also great timing that this exceptional new gas acreage extends our project area during the lead-up to such a critical time for the east coast gas market.”
State Gas today announced a private placement raising $9.5 million at $0.55 per share agreed with agreed with energy and technology sector investors.
The company also launched a share purchase plan targeting a further $2 million to allow qualifying shareholders the opportunity to participate alongside the private placement.
Proceeds from both equity raisings will be used to drill and production test at least three new gas wells (subject to approvals), and provide funding for field geology, seismic reprocessing and infrastructure studies at Reid’s Dome and Block 5.