A blue horizon for Queensland CSG explorer

RAPIDLY evolving energy exploration company Blue Energy has strategically positioned itself to capitalise on Queensland’s CSG potential, with assets throughout the state.
The company’s extensive exploration portfolio contains a base of eight CSG-operated petroleum exploration permits, and it also holds interests in conventional assets in the Cooper/Eromanga Basin region.
In February, Blue Energy announced the appointment of former Santos managing director John Ellice-Flint to the role of executive director. While with Santos, from December 2000 to March 2008, Mr Ellice-Flint drove the development of the company’s eastern Australian CSG portfolio which now underpins its plans to build an LNG plant at Gladstone.
When Mr Ellice-Flint’s appointment was announced, Blue Energy chairman Peter Cockcroft described it as “a coup for the company”.
“[Mr Ellice-Flint’s] ability to construct and execute deals will assist in achieving our goal of seeing the company’s portfolio value increase in the short and medium term,” he said.
Mr Ellice-Flint’s appointment included a sign-on bonus of 41.2 million shares, valued at about $3.6 million, and eligibility for another 82.5 million options, with a strike price of 6.25 cents each, if he met three targets: two relating to gas reserves and one related to the market capitalisation of the company. Also in February, Blue Energy announced that it had negotiated the placement of 160,000,000 million ordinary shares, at an issue price of 6.25 cents per share, to professional and sophisticated investors. The company reported that the $10 million placement was undertaken to raise funds to execute programs at its Sapphire and Monslatt blocks in ATP 814P in Queensland and, given sufficient funds, for targeted activities on other permit areas.
“The Sapphire and Monslatt block programs are expected to deliver up to 1,500PJ of 3P reserves and up to 800PJ of 2P reserves, with successful production test results from the wells in these blocks,” the company said in a statement to the market.
“In conjunction with the placement… a Share Purchase Plan (SPP) will be made available to eligible existing shareholders. Shareholders with Australian and New Zealand registered addresses will have the opportunity to apply for up to $15,000 of new fully paid ordinary shares.
“The Issue Price for each Blue Energy share under the SPP will be 6.25 cents, the same price as the placement, being a 20 per cent discount to the volume weighted average price of Blue Energy
shares over the last five ASX trading days up to the record date of 15 February 2012.
“The SPP will be underwritten by Intersuisse Limited to an amount of $4 million.”
A bright CSG future
Blue Energy has held 100 per cent of Bowen Basin permit ATP 814P for 12 years, and the area is home to the company’s most exciting potential CSG assets. The permit area consists of seven disconnected blocks covering the Bowen Basin, from the south of Moranbah to Newlands. Blue Energy’s main targets for CSG exploration in the permit area are Late Permian coal sequences, namely the Rangal/Bandanna Coal Measures, Fort Cooper Coal Measures and Moranbah Coal Measures which occur variously within the blocks comprising ATP 814P.
Blue Energy has undertaken a high level of exploration activity within the permit area: initial drilling in the Monslatt block, near the township of Nebo, identified the highly-prospective coals of the Moranbah Coal Measure sequence; and core holes were also drilled in the Central and Sapphire blocks.
No solid CSG data was available for the area of the Monslatt block where the company undertook its initial drilling campaign, however Blue Energy reported that a regional geological assessment
suggested that the Moranbah P seam would be well developed and in a suitable depth window for CSG.
“The Monslatt 1 well was drilled as a stratigraphic test of the block and identified that a thick P seam was indeed present and contained observable gas,” the company reported.
“This initial well was quickly followed up by Monslatt 1A, 2 and 3 core holes. “These wells intersected not only the P seam but the Goonyella Upper, Middle and Lower seams. In total an average net coal of 35 metres is intercepted in the block.
“The core obtained from the coals was also assessed for gas content and the P seam returned a world class 23 cubic metres per tonne (raw) gas content with average composition of 95 per cent methane.”
Blue Energy reported that gas content from other coal intersections in the wells was also relatively high, ranging from between 12cum/t to 20m3/t. “In addition, carbonaceous shales were sampled and yielded up to 10cum/t (raw) in some intervals,” the company stated.
“Adsorption isotherm analysis on the P seam indicated that the coal was fully gas saturated and therefore would require minimal pressure reduction(dewatering) to initiate gas flow.” The dataset obtained from the Monslatt block’s initial coring was sent to US reserve certifiers Netherland, Sewell and Associates (NSAI) who confirmed the significance of the resource with an initial contingent
resource (3C) estimate of 3143PJ gas in place from all the intersected coals in Monslatt. NSAI confirmed the presence of a further 3630PJ gas in place of prospective resource in the carbonaceous shales identified in the wells drilled to that point.
“Additional drilling was then commenced to establish the real extent of the resource. Monslatt 5C and 6C were drilled as stratigraphic wells in the north and south of the permit and confirmed the coal’s presence and thicknesses,” Blue Energy stated. “These two wells were also drilled for stratigraphic control for pilot production wells Monslatt 5P and 6P which, along with Monslatt 4P and 7P, have been used as locations to test productivity of  the main P seam target.
“Monslatt 5P, 6P and 7P (drilled with air through the P seam) were flow tested and free flowed gas to surface from the P seam. This confirmed the fully gas saturated nature of the P seam over the
majority of the permit suggested by the core data.”
Blue Energy reported that, in addition to its work at the Monslatt Block, it had investigated the Sapphire and Central blocks of ATP 814P with core hole drilling.
“Sapphire 2 and 3 core holes were drilled in the Sapphire Block and resulted in 40 metres of net coal intersections in the Rangal Coal measures,” the company reported.
“Gas contents of up to 14cum/t (raw) were recorded and Blue Energy is encouraged by this result. Additional work in this area will be undertaken in the coming year.
“Similarly, the Rangal Coal Measures were targeted in the Central block with the drilling of the Kerlong 1 well. Whilst intersected at depth (approximately 750 metres), a total of 20 metres of coal averaging 15cum/t (raw) was intersected,” the company stated.
“Follow-up exploration work will be done on this block in due course to assess its potential.”
Drilling results from the Central and Sapphire blocks were analysed by NSAI in February 2011, resulting in an additional 3C contingent resource of 768PJ.
In its most recent quarterly report, Blue Energy stated that efforts were underway to obtain regulatory approval to undertake stimulation of “several wells” within ATP 814P.
“On approval stimulation, completion and testing will commence. Planning is being undertaken for the drilling of up to an additional two production test wells within the Sapphire block,” the company stated.
“Sapphire 4 drilled in 2011 intersected significant coal thicknesses of approximately 62 metres in the Rangal, Fort Cooper and Moranbah Coal Measures and is currently flowing gas on production test.
“The drilling of additional production wells is designed to extend the area of reserve coverage within the permit.” In addition to ATP 814P Blue Energy holds six other exploration permits: Surat Basin permits ATP 818P, ATP 896P, ATP 854P, ATP 817P and ATP 819P; and Galilee Basin permit ATP 813P Conventional oil and gas According to its website, Blue Energy is awaiting final award of its four conventional permits within Queensland, which are near the north-western boundary of the Cooper Basin within the Eromanga Basin. The company stated that preliminary geological mapping and review work would continue on the properties, which were the subject of Native Title negotiations that Blue Energy said would be finalised prior to the formal granting of the applications by the Queensland Government.
“ATPs 656A, 657A, 658A and 660A are all on or close to migration pathways, out of the Cooper Basin, of the oil found at the Inland oil field,” Blue Energy’s website stated.
“Successful wells are already located where structural and other geological trends encounter above-average permeability.
“It is probable that the oil in the Inland oil field originated in the Permian coals of the Cooper Basin and migrated through one or more of the Blue Energy permits. Blue Energy is focusing on areas down-dip to the Inland oil field, but up-dip to the Cooper Basin Permian zero edge, where regional structures may be more recent in age but may have not have been in existence during the main oil migration period.
“All four blocks are also close to or just beyond the zero edge of the Permian Cooper Basin source rocks and are  expected to have Triassic reservoirs that could lie within the migration pathway of hydrocarbons escaping from the Cooper Basin.
“Triassic sediments are expectedand may be the main conduit for migration from the underlying Permian to the south and east into the overlying Jurassic, Eromanga sediments to the west.
“Blue Energy is confident that its proposed seismic programs are likely to identify oil prospects in this under-explored part of the basin.”
In May, Blue Energy announced that it had secured three large exploration blocks in the Queensland sector of the Georgina Basin, and fourth exploration block in the Carpentaria Basin in northern Queensland.
The company reported that the Georgina Basin blocks covered an area of about 22,788 square kilometres, while the Carpentaria Basin block covered about 8490sqkm.
“At this stage Blue Energy holds these applications 100 per cent,” the company stated in its quarterly report.
“The Georgina blocks are located on the Queensland/Northern Territory border and partly adjoin the permits recently farmed out by Petrofrontier to Statoil, the Norwegian national oil company, for US$210million.
“A huge potential resource volume has been identified by Ryder Scott in a report for Petrofrontier with an estimated potential of up to 40 billion barrels of oil (unrisked high side prospective resource).
“Petrofrontier has recently spudded a well in close proximity to Blue Energy’s newly-awarded Georgina Basin blocks and the results of this well will be closely monitored.
“Native Title agreements and environmental authorities will be required before the new permits can be granted by the Queensland Government, and Blue Energy intends to commence the processes for obtaining these as soon as possible to facilitate award.”

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