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How to account for coal seam gas assets in SE Australia

Posted by gasweek on 18 September, 2007

Wood Mackenzie told the NSW Owen Review, 55 per cent (4,935PJ) of SE Australia Additional Potential gas resource can be developed and produced in the period out to 2030.  Wood Mackenzie said CSG projects tend to expand capacity incrementally and 2P reserves growth increases over time, until an economic plateau in production is reached and maintained.

Great leap forward: Wood Mackenzie  said this can be seen from a comparison of the Eastern Australia coal seam gas (CSG) reserves over time;

• In 2002, CSG 2P reserves were less than 500PJ; but

• by 2007, CSG 2P reserves are ~4000PJ.

The details were in the Wood Mackenzie paper commissioned by the NSW Owen Review; Availability and Cost of Gas for NSW Baseload Generation 31st July 2007.

Eastern Australia

Early stages of CSG development: The paper said,  during the early stages of CSG development, the initial focus of activities was establishing the economic basis for future production. This involved pilot projects which test the production capabilities of the coal seams. The completion techniques of the wells may also be tested to optimise the production rates relative to the well costs. Additional drilling may  begin to establish a 2P reserves base to enable sales contracts to be executed once economic production has been established. The 3P resource was high in this initial period, but the 2P resource was generally low. Only though further drilling could the 2P reserves be increased.

Negative effect on cash flow: With relative low production rates early on in a CSG projects development, drilling to establish 2P reserves can have a negative effect on cash flow. The conversion to 2P reserves therefore needs to be balanced against the expected rate of production growth (and commercialisation of the reserves through supporting contracts), particularly with smaller companies with limited financial resources.

As CSG projects begin commercial production, they can incrementally add capacity (pipelines, processing plant and compression) to increase production. The ultimate plateau rate for a project will depend on the available market, the costs of development, the production profile and ultimate recovery per well. As a result, CSG projects tend to expand capacity incrementally and 2P reserves growth increases over time until an economic plateau in production is reached and maintained.

How to account for coal seam gas assets: The criteria Wood Mackenzie used for the Additional Potential resources for SE Australia was:

• The ultimate Additional Potential reserves quantity used for a given project was limited to less than 80 per cent of the Possible reserves for the project;

• A modelled production plateau of at least ten years was required to support the level of capacity expansion.

This took into account the different production profiles of wells between projects. The number and timing of wells required (both production and work-overs) together with supporting infrastructure (pipelines, plant and compression) was analysed to determine the forecast production level. The production expansion of each CSG project was required to be economically viable at current gas prices.

• The Additional Potential gas resource represents a significant volume (8,578PJ) of potential gas for future development and production.

Note, this does not represent the ultimate 3P CSG resource potential of Eastern Australia, rather it is Wood Mackenzies view of the current 3P resource that we believe is capable of being economically developed in the period to 2030.

4,935PJ to 2030: Within the parameters set out above, we have forecast that 55 per cent (4,935PJ) of this Additional Potential gas resource can be developed and produced in the period out to 2030. The addition of further 3P reserves are likely over the forecast period as exploration continues and new projects are assessed

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Posted in 2P, Coal Seam Methane, CSG, CSM, natural gas, SE Australia, Volume 2520 | Leave a Comment »

SE Australia: 260pc gas replacement, 2002 to 2007

Posted by gasweek on 18 September, 2007

Heaps of gas for NSW generation: Wood Mackenzie – commissioned by the NSW Owen Review; Availability and Cost of Gas for NSW Baseload Generation 31st July 2007, provided a gas supply forecast based on a project by project analysis of 2P (Proven plus Probable) gas reserves and supply capacity, and evaluated a portion of the 3P (Possible) gas reserves of specific CSG projects “capable of development and production within the period to 2030”.

SA Australia Gas Map

Analysis of a total SE grid supply: For this report, Wood Mackenzie has provided this analysis on a total supply basis for Eastern Australia, with future production divided into three categories, each with a different degree of certainty that the gas will be delivered to market. The three categories are: existing Contracted production, the Uncontracted remaining reserves, and the likely Additional Potential gas.

23 years supply at current consumption: Eastern Australia 2P Gas Reserves at 1 February 2007 showed a replacement ratio of 260 per cent over this five year period. The total 2P gas resource of Eastern Australia as of 1 February 2007 was 13,980 PJ. This equates to approximately 23 years of production at current levels.

Gippsland Basin still a player: The Gippsland Basin, with 6,859 PJ of reserves was the most significant region in Eastern Australia in terms of gas reserves (and production) despite over 30 years of gas production.

Cooper in decline: By contrast, the Cooper Basin had 1,213 PJ of 2P gas reserves and production was now in decline following 30 years of production. CSG 2P reserves were approximately 4,000 PJ.

The biggest source – Queensland: The main area of CSG reserves was located in SE Queensland. A comparison between the gas reserves (2P) in Eastern Australia over the last five year period (2002 to 2007) shows that despite approximately 2,800 PJ of sales gas being produced in this period, 2P gas reserves have actually increased by a net 4,710 PJ. This demonstrates a healthy reserves replacement ratio of 260 per cent over this five year period.

Posted in 2P, Coal Seam Methane, CSG, CSM, natural gas, NSW, Owen Review, Volume 2520 | Leave a Comment »

NSW Gas Demand 2000-2030 – base case

Posted by gasweek on 18 September, 2007

NSW gas demand base case forecast: For the Owen Review, Wood Mackenzie built a gas supply forecast based on a project by project analysis of 2P (Proven plus Probable) gas reserves and supply capacity. In addition, it evaluated a portion of the 3P (Possible) gas reserves of specific CSG projects that it believed was capable of development and production within the period to 2030. For this report, Wood Mackenzie provided this analysis on a total supply basis for Eastern Australia, with future production divided into three categories, each with a different degree of certainty that the gas will be delivered to market.

The three categories were:

• existing Contracted production;

• uncontracted remaining reserves, and the

• likely Additional Potential gas.

Posted in 2P, Coal Seam Methane, CSG, CSM, NSW, Owen Review | Leave a Comment »

Greenpower merges Planet Gas and European Gas’ seven CSM tenements in Victoria, NSW, SA and WA

Posted by gasweek on 18 September, 2007

Still on coal seam gas, Greenpower was passing the hat for $6-10 million to explore across seven tenements in Victoria, NSW, SA and WA, reported The Australian (14/9/07, p. 25).

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Posted in Coal Seam Methane, CSG, CSM, NSW, SA, Victoria, Volume 2520, WA | Leave a Comment »

NEM zone with lowest gas cost is northern NSW at $2.38/GJ; only other zone below $3.00/GJ is southwest Qld, says NEMMCO report

Posted by gasweek on 18 September, 2007

The delivered gas prices projected to be available for gas-fired base/intermediate load plant in each of the 17 NEM zones were detailed in ‘Fuel resource, new entry and generation costs in the NEM’, a report to NEMMCO by ACIL Tasman (27/3/2007).

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Posted in 2P, CGGT, Coal Seam Methane, CSG, CSM, natural gas, Pipelines, Price, Queensland, Volume 2520 | Leave a Comment »

Origin plans 1,000MW CSG-fired power station at Spring Gully, Qld: gas cost $0.80/GJ

Posted by gasweek on 18 September, 2007

According to Origin Energy’s website, Origin gained the Queensland Government Coordinator General’s recommendation to develop a nominal 1,000MW coal seam gas-fired power station at Spring Gully, 80km north of Roma in central Queensland, said ‘Fuel resource, new entry and generation costs in the NEM’, a report to NEMMCO by ACIL Tasman (27/3/2007).

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Posted in Coal Seam Methane, CSG, CSM, natural gas, Price, Volume 2520 | Leave a Comment »