The Glenaras Gas Project is contained within ATP 2019 (formerly ATP 529) in the western portion of the Galilee Basin and is highly prospective for coal seam gas (CSG) with an independently certified 3C Contingent Resource of more than 5,300 PJ.
The Glenaras Gas Project was designed to to evaluate the quantity and quality of coal seam gas in the Galilee Basin Betts Creek and Aramac Coal Beds.
Since Galilee Energy resumed full ownership and control of the Glenaras Gas Project in late 2015, it has become our number one focus as we foresaw the opportunity arising from a looming gas supply problem that is now a daily news item.
The Company’s flagship Glenaras Gas Project (“Project”) (Figure 1), has one of the largest remaining uncontracted gas resources on the east coast of Australia with an independently derived and certified Contingent Resource+ within the Betts Creek coals with a 1C of 308 PJ, a 2C of 2508 PJ and a 3C of 5314 PJ. The Company’s primary focus is on converting these Contingent Resources to Reserves.
Since late 2015 we have moved the project forward whilst preserving both the company funds and its 100% equity position in a low oil price environment where the industry has been generally unwilling to fund exploration.
In the past 12 months, the Company has taken significant steps forward both technically and commercially.
During the latter half of 2016, the Company held detailed discussions with the Queensland Government regarding the ATP529 permit renewal, which was due in December 2016. ATP529 had been administered under the QLD Government Petroleum Act 1923, which is now outdated legislation. Most oil and gas permits are now administered under the 2004 Petroleum and Gas Act. During the quarter, the Company applied for conversion to the 2004 Act. On the 28th November 2016, ATP 529 was converted to the new Act and is now called ATP2019. The permit area remains the same.
This conversion allows much greater flexibility in moving the permit to higher forms of tenure such as retention leases (or Potential Commercial Areas) or to Petroleum Leases for production. The tenure is now fully secure for its final four-year exploration term.
Following completion of the R1 seam vertical pilot, the R1 lateral well was drilled during the 3rd quarter of 2016 through the centre of the existing Glenaras Gas Project – R1 vertical pilot (Figure 2). The aim of the lateral was to improve production offtake from the coal, accelerate drawdown and the onset of gas production.
The horizontal well was drilled with excellent geological control and was able to stay in the bottom section of the R1 coal as planned. A total of 400 m of lower R1 coal was opened. This pilot was able to confirm several key properties important for the future development of the resource, despite the poorer coal characteristics of the R1 coal in the immediate vicinity of the current Glenaras pilot. The results provided a clear path forward for the commercialisation of the asset. Modelling of the pilot data has greatly strengthened our understanding of the reservoir and our confidence in the forward commercialisation of the resource. In particular:
The artificial lift pumping system selected for the pilot has performed flawlessly. Artificial lift systems have been a continuous source of downtime and problems with previous pilots in the permit. The system developed for use in the current pilot will be used in any forward development.
The lateral pilot indicated that the Betts Creek coals in this area have a strong directional permeability, consistent with the dominant master cleat direction within the coal. This geological feature will result in increased reservoir drainage and recovery per well resulting in a reduction in development well numbers. This will have a strong bearing on future pilot design and ultimate development planning.
The pilot production and near well pressure data from surrounding wells confirms production from coal only. This is a major step forward in confidence that the Betts Creek coals can be successfully developed without any significant interference by the interbedded sands within the Betts Creek sequence.
Recent advances in lateral drilling technology allow excellent well control to stay within coal seams while drilling.
Although the water rates from the lateral well were significantly higher than the vertical well pilot a commercial gas rate was not achieved as the permeability in the R1 coal in this location has proven to be too low.
Comparisons with analogous pilots in similar coals confirm that a multi-lateral well pilot should achieve commercial pilot results and booking of first Reserves for the Basin.
Analysis of the R1 lateral well results identified the best way forward to commercialising the Glenaras project. This analysis showed that a new pilot located a short distance from the current pilot, in known better permeability coals, is likely to achieve a commercial flow result in a short time frame, enabling the timely booking of a significant Reserves.
This new multi-lateral pilot programme is currently well underway with drilling and completion activities now completed. The pilot will be commencing production start-up shortly.
The pilot is a multi-lateral pilot, with two evenly spaced parallel laterals shielding the central coal area between the two wells (Figures 3 and 4). This configuration allows the central reservoir area to be drawn down below critical desorption pressure and achieve commercial gas rates more rapidly. Importantly, the proposed new pilot location is utilising existing production facilities such as camp, evaporation pond and surface pumping equipment.
Easternwell Rig 101 commenced drilling operations with the Glenaras 10 well on 23 March. On 9 April, the Company reported that the lateral section of Glenaras 10L, the central well in the pilot, had been successfully drilled as planned with approximately 520m of net coal intersected in the well through the R3 coal seam primary target. On 6 May, Galilee announced that Glenaras 12L was successfully drilled with approximately 480m of net coal intersected through the R3 coal seam. Due to drilling issues, the third lateral well, Glenaras 11, will be initially utilised as an observation well to determine reservoir pressure drawdown.
Galilee has determined that, given the high quality of the coal and the challenges encountered with lateral drilling in this coal, the pilot will be a two well lateral with production from the Glenaras 10L and 12L laterals. The Company is confident that these two wells will be sufficient to achieve the pilot’s objectives.
One of the significant developments throughout the last two years has been the increasing gas supply shortfall in the East Coast Australia gas market. The Federal Government’s AEMO has flagged a growing shortfall in domestic gas supply as shown in the Figure below (see Figure 5). This has resulted in much media and Government attention and reflected a significant increase in wholesale gas prices on the east coast. This has resulted in increased attention on new supply options such as the Glenaras Gas Project and there is now strong support from all levels of Government to assist with unlocking this valuable asset and connect to market.
In October 2017, the Company announced the signing of a binding MOU with Jemena to work together to deliver the Galilee Energy’s Glenaras Gas Project in the Galilee Basin in central Queensland to the east coast domestic market.
The agreement fast-tracks Jemena’s plans to build a new pipeline delivering gas produced by Galilee Energy to the east coast and means Jemena will begin engaging with local communities, conducting field surveys and completing pipeline design concept works (Figure 6).
These early planning works will be undertaken concurrently with the new multi-lateral pilot with the objective that both Jemena and Galilee Energy will be ready to proceed to front end engineering and design (FEED) on both pipeline and field development in 2019.
* The estimates of contingent resource estimates were determined by Mr Tim Hower, a full time employee of MHA Petroleum Consultants LLC., Denver, Colorado, USA, on 1 September 2015, in accordance with Petroleum Resources Management System guidelines. Mr Tim Hower is a Licensed Petroleum Engineer in the State of Colorado, a qualified person as defined under the ASX Listing Rule 5.41 and has consented to the use of the contingent resource figures in this announcement.