Blue Energy (ASX: BUL) holds eight operated coal seam gas petroleum permits in the Bowen, Galilee and Surat basins in Queensland. It is also awaiting final award of four conventional permits within the Queensland portion of the Eromanga Basin.
Blue Energy is cashed-up for busy CSG drill program
Coal seam gas company, Blue Energy (ASx: BUL) logged a busy March quarter progressing on a number of operational and corporate fronts.
Blue Energy appointed a new chief executive officer in John Phillips. Previously, he was COO of successful CSG explorer Sunshine Gas. Peter Cockcroft, who was Executive Chairman since January 2009, simultaneously relinquished his executive duties to become non-Executive Chairman.
Blue Energy has inked an initial resource estimate of 3,532PJ (2C/3C) at its Monslatt Area (GIP).
This resulted from an independent assessment by Netherland, Sewell and Associates of the dataset from the Monslatt area of ATP814P in Queensland.
A significant Prospective Resource (3,630PJ Gas in Place) has been identified by NSAI relating to the gas potential of the carbonaceous shales intersected in the Monslatt wells which have yielded gas contents of up to 10m3/tonne.
NSAI have assessed the Monslatt data on the main P1 seam in the Moranbah Coal Measures (which is on production at the nearby Moranbah Gas Project operated by Arrow Energy) to be of sufficient quality to assign 2C category of Contingent Resources. Beyond the current Monslatt well dataset, NSAI have attributed 3C Contingent Resources to the P1 seam.
The P1 seam at Monslatt is, on average, five metres thick and has gas content up to 23m3/tonne (refer Figure 1). In addition, recently received adsorption isotherm test results on the P1 seam at Monslatt indicate the P1 seam is fully gas saturated.
Drilling Program in ATP814P
Monslatt Block
Drilling of the Monslatt 3 core well was completed during the quarter with the well reaching a total depth of 718m. The well was logged and suspended pending completion as a monitoring well. The well intersected 22 metres of net coal in the primary objective Moranbah Coal Measures with initial field gas content of up to 21m3/tonne.
Blue Energy has signed a Heads of Agreement with Atlas Drilling securing the Atlas Rig 3 to drill up to three (3) pilot production wells in the Monslatt Block of ATP814P. These pilot wells are designed to establish gas production characteristics within the P1 Coal Seam (Moranbah coal Measures), together with the other coal seams intersected in the recently drilled Monslatt coreholes.
This production data will enable the conversion of the current Contingent Resources (as discussed above) into 2P and 3P Reserves.
It is expected that the Atlas Rig 3 will be on location and ready to spud the Monslatt 4 Pilot Production well by early May 2010.
Sapphire Block
Access to the Sapphire 2 drilling location was delayed during the quarter due to heavy rains from ex-Tropical Cyclone Ului. It is expected that drilling will recommence with Depco 29 drilling rig by mid May 2010 following completion of additional wells in the Monslatt block.
Sapphire 2 will target the Rangal, Fort Cooper and Moranbah Coal Measure sequences approximately 2.7km north east of the Sapphire 1 well drilled by Blue Energy in 2008. The location is only 14km east of Arrow Energy’s Moranbah Gas Project.
Central Block
Following the success of the Monslatt block a review of the Central block has identified four locations for an initial exploration program in this block.
Drilling will target the Rangal and Fort Cooper Coal Measures to assess the continuity of these coals from the Arrow Energy Annandale and South Walker CSG fields which adjoin the Central block.
Drilling of these wells is expected to commence in July 2010 following the completion of the initial 5 core wells in ATP813P.
Drilling program continues in ATP813P (Galilee Basin)
The initial core hole drilling program in ATP813P in the Galilee Basin of central Queensland continued during the quarter but was delayed due to the widespread and significant flooding events in the area during February and March 2010.
The corehole program is designed to systematically explore the large ATP813P permit (approx 4,125 km2 after relinquishment) and specifically investigate the Permian aged Betts Creek and Aramac Coal Measures.
The aim of the initial coring program is to establish coal distribution across the permit, together with gas content and permeability data to identify a fairway and suitable site or sites for the drilling of pilot production wells, and to achieve initial 3P/3C certification by year end 2010.
The second well in the program, Stainburn Downs 1, spudded on 19 January 2010. The well was suspended at a total depth of 980m pending re-establishment of access to the site after widespread and significant flooding events earlier this month. Drilling activities have resumed in the permit since quarter end with Boart Longyear Rig 7 recommencing coring the hole on 12 April 2010.
Initial drilling program undertaken in ATP819P
Blue Energy commenced a single core well program in ATP819P with Ballangarry 1 spudding on 27 February 2010. The core well was designed to assess the Cretaceous section for both Coal Seam Gas and Shale Gas potential and targeted the Wallumbilla Formation.
Operations on the core well were suspended for a number of weeks following extensive regional flooding in the area. Subsequent to quarter end the well reached a total depth of 602m and was plugged and abandoned as planned. Wireline logs and desorption samples that were acquired from the well are currently being evaluated. The drilling of Ballangarry 1 well has finalised commitment on ATP819 and a renewal program has been submitted and approved.
KOGAS MOU investigating small scale LNG and CNG Projects
During the quarter the Company signed a Memorandum of Understanding (MOU) with Korea Gas Corporation (KOGAS) to investigate the feasibility of developing small scale Liquefied Natural Gas (LNG) and Compressed Natural Gas (“CNG”) projects within Eastern Australia.
A joint working group will be formed by Blue Energy and KOGAS with the purpose of identifying potential opportunities for the development and operation of micro LNG and CNG facilities with the aim of providing a clean, environmentally friendly alternative to existing fuels such as diesel, petrol and LPG.
The utilisation of natural gas vehicles within Australia is extremely low when compared to other parts of the world. Australia’s heavy duty road transport sector is well suited to the use of natural gas vehicles. The abundance of natural gas, particularly Coal Seam Gas in Australia, is ideal for the production of LNG and CNG for natural gas vehicles and the development of this market will deliver significant benefits to Australia, both environmentally and economically.
Corporate
On 31 March 2010 the Company repaid $3,000,000 of convertible notes to note holders in accordance with the terms and conditions of the convertible notes. The Company currently has no loans or debt on its balance sheet.
The Company held cash reserves of $32 million as at 31 March 2010.
