Metgasco plans to tap natural gas from its sole project, the 833 square kilometre PEL 16 permit in the Clarence Moreton Basin in New South Wales, and supply it to the local and ready-made markets of south-east Queensland and north-east NSW.
Since listing in December last year at 20c and raising $5.2 million, Metgasco has enjoyed an extremely positive first 10 months and shareholders who recently received the company’s first annual report were able to settle in for some pleasant reading.
It is still early days but punters who trusted the gas explorer with their green must have felt like proud parents reading a straight A report card as they thumbed through the annual.
“Dear Shareholders,” chairman Peter Power writes in his opening letter. “I am pleased to present you with Metgasco’s first annual report as a publicly listed company and to tell you that we have ended the year on a very optimistic note.”
The very optimistic note to which Power is referring is the tripling of the contingent Gas In Place (GIP) estimates for PEL 16.
What were previously estimated to be gas contents of 5.14 billion cubic feet per square kilometre have been reassessed on the back of gas content isotherm data from the pilot production drilling program, and now stand at 7.9-9.9Bcf/sq.km.
At the same time an evaluation of reprocessed seismic data extended the resource base area. Earlier seismic evidence showed coal continuity over about 33% of the tenement area, and the reprocessed seismic confirmed the presence of the Walloon coal measure over a further 30% of the holding.
The net effect has been to increase the total GIP of 1.05 trillion cubic feet to between 3.8 and 4.8Tcf. That is, according to managing director David Johnson, enough gas to supply the NSW market for the next 30 years.
In March, Metgasco began its first drill program on PEL 16. The program was to drill five wells and one core hole at the South Casino project area and establish gas production rates.
In April, Metgasco signed a cooperative agreement with County Energy to develop a 12MW gas-fired electricity station at the town of Casino. The power station has since been upgraded to a forecast 20MW capacity.
By mid-year the company had reported strong results from pilot production drilling with four wells flowing gas and water, and had begun detailed design and commercial work for the power plant based on a 12MW capacity.
The first drill program was subsequently completed and a 35psi overpressure previously measured was confirmed. The over-pressuring allows coal to hold a higher gas content and assists the delivery of gas from the coal seam reservoir to the production well, increasing potential productivity.
Denver-based independent petroleum reservoir advisors Malkewicz Hueni Associates recently completed well simulation modelling and sensitivity testing to evaluate alternative development scenarios for the field.
“The study has identified the most suitable approach for optimising well productivity,” said Johnson.
Johnson said he was happy with the progress to date and confident Metgasco would be booking reserves for the County Energy power station in the first half of next year.
He said the company was well advanced with front-end engineering for the power plant, based on the updated 20MW capacity with some scoping already completed.
The real estate for the plant will be secured by year’s end with construction to begin within six months in parallel with the certification of reserves.
The cost of the plant had not been finalised but Metgasco had forecast $25 million would be needed for a 12MW plant.
A second round of development will focus on a preliminary agreement entered into with Northern Co-Op Meats Co. to develop a 12MW power generation project for the Co-Op’s meatworks factory in Casino.
Johnson believes an opportunity exists to help the meatworks lower its overall costs while utilising the significant gas resource.
The development of a power generating operation in the Casino region has important implications for Metgasco, giving it cash flow positive status.
“This will enable the company to use internal sources of capital to develop its resources to the extent that larger scale activities either in power or gas sales can be contemplated,” Johnson said.
“These activities would be on a more significant scale. The generation of power into the area will also solve an emerging problem in the region, which is currently experiencing supply constraints.”
The south-east Queensland and north-east NSW regions do not have an embedded power supply.
They are also Australia’s fastest growing regions, according to Johnson.
Their combined population is expected to increase from an estimated 2.65 million last year to 3.7 million by 2026.
“The lifestyle shift towards coastal living looks likely to continue and demand for energy is likely to grow at a similar rate,” Johnson said.
He said electricity demand within a 100km radius of PEL 16 would grow from 450MW to 650MW by 2010. Some of the towns and cities within that 100km radius are Surfers Paradise, Tweed Heads, Murwillumbah, Byron Bay, Lismore, Ballina and Grafton.
“Metgasco is one of the closest gas suppliers to this fast growing region … close to infrastructure and power transmission networks,” Johnson said.
PEL 16 is just 70km from the Gold Coast gas grid.
With gas currently being supplied from outside the region, Johnson expected Metgasco to attract very healthy profit margins as an embedded energy supplier.
Though the operation appeared fairly simple on face value, Johnson warned that Metgasco was confronted with the same industry problems other companies were experiencing, such as a shortage of suitable personnel.
But he was quick to point out that attracting people to a project that uses Lismore as its base, just 60km from the coast, was a lot easier than luring people to the middle of the outback.
Johnson says the company has a huge gas resource with room for further discovery, and he is confident Metgasco can provide energy to the south-east Queensland and north-east NSW for many years to come.
Metgasco…at a glance
HEAD OFFICE
Level 3, 32 Walker St
North Sydney NSW, 2060
Ph: +61 2 9923 9100
Fax: +61 2 9923 9199
Email: info@metgasco.com.au
Web: www.metgasco.com.au
DIRECTORS
Dr Peter Power, David Johnson, Glenda McLoughlin, Richard Wood
MARKET CAPITALISATION
$23.4 million (at press time)
MAJOR SHAREHOLDERS
David Johnson 19%
Glenda McLoughlin 9%
David Smith 5.11%
*This profile, first published in a different form in ResourceStocks, was commissioned by Metgasco
