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State Gas-Santos JV awarded new central Queensland acreage

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World Coal,

State Gas Ltd, in joint venture (JV) with Santos Ltd, has been appointed preferred tenderer of two new areas under the Queensland government’s latest Petroleum Land Release Program. The two new gas areas, PLR2021-1-2 and PLR2021-1-3 are adjacent or in close proximity to both State Gas’ existing Reid’s Dome and RollestonWest Projects (to the west and north), and Santos interests to the east.

PLR2021-1-2 (Block 2) lies adjacent to State Gas’ Reid’s Dome (PL231) and Rolleston-West Projects (ATP2062) to the west and north, and the 50% Santos owned Warrinilla and Warrinilla North Projects (PL451 and PCA301) to the east. Block 2 effectively provides acreage connectivity between State Gas’ Reid’s Dome and the Santos interests to the east.

PLR2021-1-3 (Block 3), some 20 km to the east, lies between the Warrinilla and Warrinilla North projects and the Santos operated Arcadia Valley project (currently under commercial production). Two high pressure export pipelines (Queensland Gas Pipeline and the Gladstone LNG Project pipeline) pass through Block 3, providing potential access to both export and domestic markets.

The new blocks, a combined 1035 km2 , will increase State Gas’ acreage posi-tion (Reid’s Dome: 181 km2 and Rolleston-West: 1414 km2 ) by approximately 60%, to 2630 km2, with the potential to significantly increase its resource position.

Both blocks are highly prospective for coal seam gas in the Bandanna Formation, in production on adjacent acreage, and which State Gas is currently testing at its Rolleston-West Project. The blocks also contain targets for conventional gas.

As is the case for State Gas’ existing acreage, neither block is subject to domestic gas reservation, enabling gas produced from the areas to be sold into any market.

Under the JV, State Gas will hold 35% of the new permits, with Santos holding the remaining 65% and appointed operator. In addition to the economies of scale available from coordinating operations with Santos, the JV is expected to benefit from Santos’ extensive experience in producing from Bandanna coal formations in the area.

The award of the areas to the State Gas–Santos JV results in an alignment of the partners’ ownership interests across the gas resource in the majority of the southern Bowen Basin, providing the opportunity for coordinated and synergistic development of the whole region.

Block 2, surrounded by State Gas’s Reid’s Dome and Rolleston-West Projects, can be developed as a single economic unit with those projects. Similarly, Block 3, the southern end of which is surrounded by Santos operated project areas, may be developed as a single economic unit with those projects, co-ordinated with the State Gas projects.

The companies will now proceed to carry out initial works to obtain the environmental and other approvals relevant to the areas. Native Title has been extinguished over the vast majority of Block 2, which is expected to facilitate the quick grant of the authority to prospect for that area and enable early commencement of works.

State Gas Executive Chairman, Richard Cottee, noted the particularly fortuitous timing of the strategic acreage award. “The high gas prices triggered by the war in Ukraine appear to be with us for the foreseeable future. The conflict has highlighted Europe’s ongoing dependence on gas in the transition to a lower carbon future. The European imperative to reduce reliance on Russian supply, and the interlinkages of the global market, make it hard to see gas prices substantially reducing in the foreseeable future.”

“As announced on 2 May 2022, State Gas is already working to seize this opportunity and bring gas to market as quickly as possible, prioritising development of the conventional gas in its Reid’s Dome Project and rapid appraisal of the near pipeline quality gas at Rougemont, in its Rolleston-West Project. Desktop studies have confirmed this approach as our optimal development plan,” he added. “

These two new blocks, within our existing area of expertise and operations, are a significant addition to State Gas’ existing portfolio. They will provide increased syn-ergies in operations, synchronistic development and gas marketing optionality,” Cottee continued.

“None of our acreage is constrained by a domestic gas reservation, and all blocks contain targets for both coal seam gas (a steady flow supply) and conventional gas (a rapid response, or peaking, supply). Two separate transmission pipelines are available, providing access to both export and domestic markets. I have always been a firm believer in the value of optionality and I can confirm that, with this award, State Gas’ flexibility is increased.”

Cottee also welcomed the establishment of the relationship with Santos: “Santos is a major player in the industry, with a long track record of safe and sustainable operations. Of particular relevance here is its extensive holding in the area, and its unrivalled experience with the 3 Bandanna coals, the primary target of both these new blocks and our existing Rolleston-West project.

“So, all in all, we are delighted to receive this award of new acreage, and will work with Santos to leverage all our combined existing projects to bring the gas to market as quickly as possible.”

“It is my hope that this award will herald the beginning of a timely and rational development of this new province by both Santos and ourselves at a time when the market is crying out for such development.”

“The Queensland government is very alive to the importance of the gas industry to the Queensland and national economy, and also importance of new gas supplies to support industry and also underpin the transition to a lower carbon future,” he concluded.

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