Red Sky Energy (ASX: ROG) is an Australian exploration company focused on coal seam gas. It has extensive acreage in Queensland and New South Wales which is well located to supply either local power generation or the emerging LNG industry in eastern Australia.
The Company has substantial certified reserves and recently made an exciting shallow gas discovery, both in the highly prospective Clarence Moreton Basin.
Red Sky Energy (ASX: ROG) has reached a key milestone after the New South Wales Government gave its approval for the drilling of the Talma pilot production well in the Clarence Moreton Basin.
Managing director Rohan Gillespie told Proactive Investors the approval was exciting news for the company.
“There is growing interest in our activities as there is potential for our gas to be used for domestic gas-fired power generation. Our assets are ideally located for this.”
The company will now contract a drilling rig to drill the well, which targets the highly prospective Kangaroo Creek Sandstone gas resource.
Gillespie said while it was uncertain when this would be achieved, the company had historically taken about 3 months to secure a drilling rig.
Red Sky had previously said it would drill the pilot well with air to avoid water contact with the reservoir and avoid expanding clays.
Once the well was completed, it would be operated over an extended period of several months to allow for initial reserves certification.
Red Sky had in August last year confirmed the Talma-1 gas discovery in PEL 457 had made a prospective tight gas discovery that could be similar to highly productive shallow gas formations in Western Canada and Northern U.S..
Talma-1 had intersected a 83 metre gross gas column from an interval of between 480 metres and 563 metres and had flowed gas at a rate of 28,000 cubic feet per day during drill stem testing of a 10 metre interval from 545 metres to 555 metres.
Core analysis had revealed the sands were primarily made of quartz and had generally low permeability with reasonable porosity.
No upper seal or structure was identified leading the company to say that further drilling was required to determine if the discovery represented an unconventional resource that extended over a large area with a potential gross gas charged column of about 200 metres.
Should this be the case, Red Sky could have a potentially large play in its hands as the Kangaroo Creek Sandstone covers 324 square kilometres within PEL 457 and PEL 479.
Red Sky added that should it be gas charged throughout its total thickness, the Kangaroo Creek could hold between 3 petajoules (2.83 billion cubic feet) and 6.5 petajoules of gas in place for every square kilometre, giving a potential in-place resource of 972 petajoules to 2106 petajoules, or between 0.9 and 2 trillion cubic feet of gas.
Under its farm in agreement with private company Clarence Moreton Resources, Red Sky has already earned a 30% stake in both PEL 457 and PEL 479, it can increase its stake to 70% in 4 stages. Each stage can be earned by drilling 1 well in each permit.
Drilling of the Talma pilot will also allow it to earn an additional 10% in PEL 457.
Once it reaches 70% in the 2 permits, Red Sky will have the option to buy the remaining 30% based on an independent valuation.
The company can also earn an initial 30% stake in PEL 478 by drilling 1 well with an option to increase this to 70% on the same terms as the other 2 permits.
While further drilling at the Talma project is subject to the results of the pilot well, Red Sky is planning to drill other wells on its New South Wales acreage.
Gillespie said he did not “see any impediments in securing approvals for further wells in New South Wales”, just that the process was now more stringent and as a result would cost more and take longer.
He added that finding a supportive landowner would also be more challenging due to the negative publicity surrounding drilling in the State.
Red Sky is also continuing with its activities in Queensland where it has farmed into ATP 946 and ATP 840 under 2 separate agreements with Resolve Geo and Clark Oil and Gas.
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