30 May 2012

Solid Energy to refocus coal seam gas development in Taranaki

Solid Energy is refocusing its coal seam gas development work to Taranaki after successfully proving the technology in New Zealand conditions at its Huntly coal seam gas demonstration plant in the Waikato.

The latest independent appraisal of Solid Energy’s coal seam gas acreage in New Zealand’s Taranaki region indicates that Solid Energy now has 858,000 million cubic feet (mscf) of contingent resources. In energy terms, this is ~900 petajoules (PJ), the equivalent of 45 years’ supply for a combined cycle gas turbine like the 400MW generation unit at the Huntly Power Station.

The assessment, by Dallas-based Netherland, Sewell and Associates Inc (NSAI), is based on exploration results to 31 December 2011. Solid Energy previously reported its contingent (2C) coal seam gas resource holdings at 30 June 2010 as the equivalent of 190 PJ.

Dr Steven Pearce, Solid Energy’s General Manager Gas Developments, says the four-fold increase in contingent gas resources is extremely encouraging. “Dan Paul Smith, lead author of the report, says that based on NSAI’s knowledge of similar field developments, the best estimate (2C) resources have a reasonable chance of being commercial,” Dr Pearce says.

The Taranaki region is the centrepiece of New Zealand’s oil and gas production, with a number of downstream gas processing plants and associated petrochemical industries. The country’s two main gas transmission pipelines run to the west and north of Solid Energy’s coal seam gas tenement.

Solid Energy is applying to New Zealand Petroleum and Minerals (NZPM) for a five-year extension of its Taranaki permit to allow the project to move to an appraisal/discovery phase, while at the same time considering future options for our Huntly petroleum exploration permit (PEP).

“One option could be to put the site into care and maintenance, ready to quickly ramp up when gas prices justify this. We are still working through the planning and work programme for the short to medium-term of this permit,” Dr Pearce said.

Dr Pearce says Solid Energy was pleased at having achieved the majority of its objectives for its Huntly coal seam gas demonstration plant. “The trial proved we can produce high quality coal seam gas which generates electricity. This was achieved in an environmentally acceptable way in New Zealand while meeting Solid Energy’s health and safety standards.

“However, given the soft short to medium-term gas price outlook and the expected cost of gas production in Huntly, further commercial scale-up of coal seam gas production is not justified at this time. Work programmes will continue in the Huntly permit to assess cost-effective technology advances and niche high-value market options ahead of changes in market conditions, justifying commercial expansion of the Huntly coal seam gas plant.

“The decision to focus coal seam gas operations in Taranaki does not affect our underground coal gasification pilot plant in Huntly which continues to show great promise,” Dr Pearce says.

Solid Energy’s coal seam gas work programme in Taranaki aims to identify the best area to develop for extraction. The gas resource sits in multiple thin coal seams, so this will require some innovative technical solutions to be trialled through appraisal, Dr Pearce says.

As part of the decision to focus coal seam gas operations in Taranaki Solid Energy is releasing a number of less prospective PEPs - Waiau (PEP 52359) and Winton (PEP 53572) in the South Island, and Counties PEP 52043 in the North Island.

Coal seam gas is one of a suite of leading-edge technologies that Solid Energy is bringing to New Zealand and developing ourselves for use here and internationally to provide secure, affordable, environmentally acceptable energy and high-value products for local and export markets.

ENDS

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