Old discovery to get fresh look

STATE Gas is the latest start-up to try to break Australia’s oil and gas IPO drought, with a plan to raise up to $5.25 to succeed when multiple past attempts have failed and drag the Reid’s Dome conventional gas project forward.

Old discovery to get fresh look Tony Bellas at the heart of the Reid's Dome anticline.

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Following a recent transaction with majority owner Triangle Energy, State Gas now has 60% of PL 231 in central eastern Queensland, and it plans to work with junior partner, UK-based Dome Petroleum (40%).
 
Dome comes from the same stable of shell companies as concerns such as Electro Silica Oil & Gas and Wharf Resources that have been removed from numerous joint ventures across Australia and New Zealand over past decade for failing to meet cash calls. 
 
Dome has been involved in the moribund PL 231 for more than a decade, but the project, located 545km northwest of Brisbane, and 50km southwest of Rolleston, over part of the Denison Trough.
 
With increasing gas supply issues in the east coast gas markets, largely caused by the Gladstone LNG projects, State Gas is intending to bring a new generation of technologies to assess the development of shallow Cattle Creek Formation.
 
A secondary target in the underlying Reids Dome beds is anticipated to be at least 2770m thick and have not been fully penetrated in the Denison Trough, and is a more expensive undertaking. 
 
Gas from the only testing conducted from sands within the Reids Dome beds indicates that the gas is wet, with significant amounts of ethane and higher hydrocarbons.
 
The risks of gas flowing have been largely dealt with by the fact that both the Cattle Creek and Reids Dome beds have flowed gas to surface in a number of the 14 exploration and appraisal wells drilled since exploration started in the area in the 1950s. 
 
The Cattle Creek Formation has been seen at depths as little as 130m in the area, and State Gas believes the combination of cheap drilling costs and a known resource will help the development of a pipeline to the south, which would remove the risks of the gas being stranded. 
 
State Gas' independent experts report has backed the exploration potential and says the field should be able to produce commercial quantities of conventional gas from the Cattle Creek Formation, which in turn could support further investigation of the substantial potential of the Reids Dome beds. 
 
State Gas has already lodged a pipeline survey licence application with the Queensland Department of Natural Resources and Mines to evaluate potential routes for a gas feeder pipeline to connect PL 231 with the Queensland Gas Pipeline and the broader east coast gas market.
 
It intends to open negotiations with potential gas customers in tandem with a planned appraisal program, although the company has flagged a preference for selling all gas onto the spot market rather than entering into gas supply contracts.
 
The $2.4 million raised for State Gas' share of the appraisal program will involve the drilling and testing of two step-out wells from the existing Primero-1 and two development wells, plus the flow testing of several historical wells.
 
State Gas will also use $267,000 of the funds raised to meet back-costs from Triangle, which until recently held the 60% stake as a legacy asset.
 
The company's board includes Triangle managing director Rob Towner, former CS Energy CEO and current ERM Power chairman Tony Bellas as non-executive chairman, well known Perth-based geophysicist and petroleum engineer Ian Paton, and Greg Baynton who will step in on an interim basis as executive director. 
 
Baynton was described as being instrumental in re-identifying the PL 231 opportunity.
 
Exploration in the Bowen Basin around the Springsure-Rolleston area commenced in the end of the 19th century and continued into the early decades of the 20th, primarily for coal, with the switch to oil and gas in the 1940s under Shell and Australasian Oil Exploration, culminating in the first two AOE Reid's Dome wells in the mid-1950s. 
 
The Cattle Creek Formation flowed at rates greater than 500,000cfpd between 136-142m, and there were other flows from the Reids Dome beds at rates too small to measure.
 
Exploration over the following decades was sporadic given the stranded nature of the resource.
 
The final well drilled within PL 231 was Victoria Petroleum's Primero-1, another twin of the originally discovery well. It flowed at 2.8MMcfpd. 
 
Much of the work has been haphazard, some of it has been very poorly reported, and in many cases the correlation of zones tested in different wells, especially between the northern and southern localities, has been non-existent until VicPet's efforts a decade ago. 
 
While no reserves are estimated for PL 231, a number of reports have estimated resources within the Reids Dome anticline, including a potential resource of 330Bcf. 

 

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