State Gas delays first gas from Reid's Dome

ONSHORE gas developer State Gas has delayed first gas from its Reid’s Dome project in Queensland until 2022, but reassured shareholders today future supply shortages will place the company in a “sweet spot” in years to come.
State Gas delays first gas from Reid's Dome State Gas delays first gas from Reid's Dome State Gas delays first gas from Reid's Dome State Gas delays first gas from Reid's Dome State Gas delays first gas from Reid's Dome

Paul Hunt

Senior Journalist: Energy & Commodities

Paul Hunt


Energy News is making some of its most important coverage of the COVID-19
pandemic freely available to readers. For more coverage, please see our
COVID-19 hub.

Small cap State Gas holds a 100% interest in the onshore CSG Reid's Dome Gas Project in production license PL 231 in Central Queensland, and only recently returned to the field after a long wet season which caused extensive flooding across the region. 

However, the company said in a statement to shareholders this morning it had delayed first gas from the project until 2022 due to economic challenges brought about by the COVID-19 pandemic and "general low oil prices" which have fallen more than 60% in recent months.

"Recent events have impacted our plant to achieve first gas, now delayed to 2022, but your board believes this new timing will place the company in a ‘sweet spot' for gas deliveries into the East Coast market," executive chairman Richard Cottee said in a letter to investors. 

Cottee said the declining gas production from the Bass Strait, together with a curtailment of capital on the appraisal and development of new sources of domestic gas supply and an expected industrial rebound in Asia would result in "very different" market conditions. 

The Australian Energy Market Operator's latest Gas Statement of Opportunities Report found the Australian domestic market is looking at a stark lack of gas supply beyond 2025, primarily due to maturing fields.

The report found that after 2025 existing and committed gas production and projects in southern Australia would not be enough to meet east coast demand. Supply will fall by roughly 35% after 2023, according to AEMO.  

"[State Gas] anticipates being positioned to deliver Reid's Dome gas into the market at just that time," Cottee said. 

While the company has delayed first gas, it will focus on production testing its existing wells. The drilling rig has now been returned to the field to replace pumping mechanisms on two wells. 

Nyanda-4 was the first CSG well within the project work program and was completed in November. 

 The well was drilled in the southern section of the permit using the Silver City Drilling Rig 25 and intersected 40 metres of net coal and a further 25m of carbonaceous shale, as well as several conventional tight gas sands.

State Gas also recently completed logging tests at the Sercold-1 well, with wireline logs indicating 27m of net coal at a depth of between 515m and 1185m in seams of around 4.5m thickness. 

State Gas' had a shareprice worth 38 cents just before noon, nearly half of what it was worth in January before the COVID-19 pandemic really hit the markets and the oil price ‘war' between Saudi Arabia and Russia which sent oil stocks tumbling.