State Gas encounters gas at Reid’s Dome in Queensland

Gas explorer State Gas (ASX: GAS) has encountered “good gas shows” in the second well of a drilling program at its 80% owned and operated Reid’s Dome gas project in central east Queensland.

The company today emerged from a voluntary trading suspension to announce the successful completion of drilling, coring, logging and testing of the Nyanda-4 coal seam gas and conventional gas well, with “quick-look” petrophysics indicating the intersection of more than 60m of coals and carbonaceous shales.

Data obtained during the drilling provided “good gas shows” from 392m, with gas content increasing overall with depth, the company reported. Data also indicated that the well was still in gas shows at its current 1200m total depth.

In addition, a 150m cored zone sampled 12 seams of good quality bright coal with gas being observed bubbling from the coals. Nine of these samples have been taken for desorption testing.

The cored zone also intersected seven zones where light oil was observed bleeding from fine-grained sandstones, as well as gas hissing from sandstones, State Gas said.

The Nyanda-4 well was designed to be plugged and abandoned, however the planned total depth was extended by 200m to 1200m and has now been suspended for future re-entry and further testing.

State Gas chairman Tony Bellas said the outcomes of Nyanda-4 had far exceeded the company’s expectations and confirmed a significant coal seam gas project and a “free gas” presence within the Reid’s Dome structure.

“While we await further analytical results, the initial findings from Nyanda-4 indicate that this is a great outcome for the shareholders of State Gas, the state of Queensland and the Australian east coast gas market,” he said.

Reid’s Dome gas project

The Reid’s Dome gas project is located south west of Rolleston in Queensland’s Bowen Basin, about 50km from the Queensland Gas Pipeline which pipes gas to large industrial users in Gladstone and Rockhampton.

Gas was first discovered in the project area in the 1950s, although Nyanda-4 is the first well to explore for coal seam gas.

Nyanda-4 was the second well to be drilled in State Gas’ two-well drilling program. The first, Primero West-1, was spudded in November.

Although wireline logs at Primero West-1 had indicated a 7.5m net gas-bearing zone, this well was plugged and abandoned on the basis that any full-field development of the Cattle Creek formation would require additional seismic to optimise the locations of production wells.

Taking the whole pie

State Gas also announced it has initiated the process to bump up its stake in the petroleum licence containing the Reid’s Dome project from 80% to 100%.

This election to raise its interest follows last week’s increase from 60% to 80% and according to the company, it is expected to be completed through the provisions of the joint operating agreement it currently has with UK-based Dome Petroleum Resources.

However, Dome director Dr Bruno Denantes has argued there is “no truth” in the suggestion that State Gas is acquiring the entire project.

“The position is that, following recent discussions between Dome and State Gas on a number of issues, Dome, which until recently owned a 40% share in the project, offered to sell a 20% share to State Gas on certain conditions, in particular that Dome would retain its remaining 20% share. That offer was accepted by State Gas,” Dr Denantes said.

State Gas then responded in an update stating that under the provisions of the joint operating agreement, it was entitled to acquire the interest of another participant if that other participant’s interest falls below 25%.

“State Gas is aware of recent comments made by Dome to the Australian media asserting that State Gas is not entitled to acquire Dome’s remaining 20% stake in the project,” the company announced.

“State Gas, via its legal advisors, has written to Dome today rejecting this assertion and confirming that the notices issued on 4 December 2018 under the JOA are valid and enforceable.”

State Gas, which is already the sole operator of the project, said it will soon wholly-own the Reid’s Dome project and PL 231 upon completion and settlement of the arrangements.

“State Gas has at all times acted both lawfully and appropriately and will continue to do so,” it stated.