State Gas announce 2Q21 activities report

Highlights

• Nyanda 4 well produces gas at close to 700 000 ft3/day before stabilising at 140 000 ft3/day.
• Production Log Test at Nyanda 4 confirms production of gas from 1150 m depth, increasing potential project reserves.
• Infrastructure providers willing to build, own and operate pipeline and facilities, reducing the capital requirements of State Gas.
• First drilling at the company’s 100% Rolleston-West Project (ATP 2062) confirms a viable coal seam gas play.
• Rougemont 1 and Rougemont 2 wells intersect 8 m net coal, with seams up to 2.8 m thick and laterally continuous over many kilometres.
• Exceptional permeability at Rougemont 2 bodes well for gas production.

Reid’s Dome

2Q21 has been a defining period for State Gas in its march towards commercial production from its 100% owned Reid’s Dome Project (PL231) in 2023. The quarter saw ongoing production testing in the southern Nyanda focus area and the re-establishment of testing at the central Serocold 1 as the company progresses appraisal of the permit for development.

Production testing at Nyanda 4 saw gas flows from the well surge towards 700 000 ft3/day before settling back to a rate approximately 140 000 ft3/day with an ongoing steady increase. These results have been very encouraging and have confirmed the simple and cost-effective completion technique employed for this well.

Data obtained from the production test at Nyanda 4 has indicated that gas is being produced from zones much deeper in the well than is traditional for coal seam gas, and during the quarter the company undertook a production log test (PLT) of the well to confirm this. The results of the PLT have clearly confirmed three prime production zones, of which the most productive are the top zone, at depths between 400 and 600 m, and in addition, the lower zone at around 1000 to 1200 m. The confirmation of gas production at these lower depths will be critically important as it not only confirms more productive zones in the Reid’s Dome Beds, but also increases the area from which production can be expected, both of which should translate to greater reserves.

Production testing also continued during 2Q21 at the Nyanda 7 and 8 wells (approximately 2.5 km to the north and south west of Nyanda 4 respectively). Gas production from these wells was constrained by what the company believes is higher ‘skin’ at the interface between the coal and the wellbore and lower permeabilities, but nonetheless amounted to 40 000 – 50 000 ft3/d at Nyanda 83. The company believes that substantially higher rates can be achieved from this well with jetting of the higher productive zones, thereby exposing more of the productive coals. It hopes to confirm this enhanced completion technique this quarter.

The highest productive zones in Nyanda 8 will be identified by a PLT, which is expected to confirm production at depth is also a feature in this well. A PLT at each of Nyanda 4 and Nyanda 8 will provide invaluable information towards the company’s understanding of the Reid’s Dome coals, however should not be further required as a standard practice.

Serocold 1, returned to gas production, surged over 60 000 ft3/day, stabilising at approximately 36 000 ft3/day and increasing, before solids in the wellbore caused the pumps to seize. This influx of solids can be prevented by foam squeezing or sleeving (both of which are standard techniques) with little material incremental cost. The company plans to implement a foam squeeze in this well during the current quarter to confirm this central area of the permit as commercially productive.

With good results from these works, the company anticipates obtaining a reserves certification next quarter.

Infrastructure financing

Encouraged by the results so far at Reid’s Dome, the company are actively engaged with infrastructure providers for the export pipeline and processing plant. These providers have indicated their willingness to proceed on a build own operate (BOO) or rental model, reducing our capital requirement for development.

Rolleston-West

During the quarter the company drilled the first two wells in its new Rolleston-West Project (ATP 2062), granted in October 2020. These two coreholes, Rougemont 1 and 2, provided the company’s most exciting results for the period.

Both wells intersected 8 m of net coal, with the thickest seam 2.8 m thick and laterally continuous over many kilometres. Coal was intersected at Rougemont 1 at 495 m and at Rougemont 2 at around 295 m. Pleasingly the core samples showed methane content of 92.8% and 94.4% respectively. The permeability at Rougemont 2 ranged from 25 millidarcies to a staggering 395 millidarcies. These results warrant production testing at Rougemont 2, for which planning is currently underway.

The impact of a successful Rougemont production test cannot be over-stated. Rougemont is located on the northern route option for the export pipeline from Reid’s Dome, providing the potential for Rougemont to become a brownfield development in economic terms. The company’s aim is to progress the Rougemont opportunity as quickly as possible to harness the efficiencies from its complementary Reid’s Dome development.

Financial position

At the end of the quarter the company had cash at bank of US$3.16 million, after expending US$2.8 million in project development costs, and US$0.3 million in other costs.

Read the article online at: https://www.worldcoal.com/cbm/03082021/state-gas-announce-2q21-activities-report/