woosh underpin 123 pj gas sales, page-3

"woosh" - operations update ASX ANNOUNCEMENT
20 May 2005
Operations Update
The Directors of Arrow Energy NL [Arrow] advise the following operations update.
PL 194 – Kogan North Development (Arrow 50%, CS Energy 50%)
Development drilling continues with two rigs on site at Kogan North. To date twelve wells
have been drilled and cased and operations are advanced on two further wells. The first four
production wells have been completed with production pumping equipment and will be
brought on stream from next week.
Drilling results to date have exhibited coal thicknesses as prognosed with initial water flow
tests that have indicated production rates of 3500-4000 BWPD - significantly exceeding
expectations.
Earthworks and pipeline gathering system work is progressing well with welding completed
on the main gas and water lateral pipelines. Excavation and burial of the main pipeline and
commencement of construction of the evaporation dam will start next week.
Contractors have completed work on construction of the pipeline crossing of the Condamine
Highway. This crossing will take gas and water from the field to the processing plant
adjacent to the Roma to Brisbane pipeline.
Compressors ordered from Universal Compressors in the USA for the central gas processing
facility are on schedule for June shipping from the USA.
Project Background:
The Kogan North CSG Project is located in the Surat Basin approximately 40 km west of the
township of Dalby in Queensland.
First sales gas from the field is expected in October this year.
The development of this 30-35 well project will be for the purpose of supplying 4 PJ of gas
per annum for 15 years to CS Energy’s Swanbank ‘E’ power plant, located near Ipswich in
south east Queensland. Gas will be transported to Swanbank via the Roma to Brisbane
Pipeline.
CS Energy is to spend up to $10.8 million towards the Kogan North Development Project to
increase their share of the project to 50%. A Heads of Agreement has been signed with the
Australian Pipeline Trust (APA) to fund the downstream processing facilities 100% and to toll
the Kogan North gas through these facilities.
- 2 -
Arrow estimates its share of the total Kogan North development capital of approximately
$25 million will be approximately 10%.
Arrow is the Operator of the Kogan North CSG Project and retains 50% working interest.
APA will operate the Central Gas Processing Facility.
PL 198 - Tipton West Pilot (Arrow 80%, Comet Ridge 20%)
As announced earlier this week, flow rates at the Tipton pilot have previously increased to
the level required for reserves certification. This has resulted in 1P reserves of 61 PJ,
2P reserves of 143 PJ and 3P reserves of 2028 PJ.
Gas flow rates have continued to increase, with the total pilot production exceeding 800 mcfd
and the TWP-15 well exceeding 280 mcfd.
An additional well, TWP-16, is being completed. This well will test a variation of the current
successful completion technique in TWP-15 by adding a gravel pack to the under-reamed
well-bore.
An additional well, TWP-17 will be drilled shortly, 4km north of the pilot, to add additional
2P reserves from the large volume of 3P reserves in that area.
Project Background:
The Tipton West Pilot (TWP) is located in the Surat Basin approximately 20 km south of the
township of Dalby in Queensland.
This pilot has been used to certify reserves and also to test completion techniques and water
disposal methods – all with very encouraging results.
The recent upgrading of reserves to the “Proven” and “Probable” categories will allow the
three existing sales Memoranda of Understanding (Ergon Energy - 3.2 PJ p.a. for 15 years;
BP - 15 PJ over 5 years; and ERM Wambo Power – 4 PJ p.a. for 15 years) to proceed to
finalisation of firm gas sales agreements.
First sales gas from the Tipton field is scheduled October 2006 at a rate of 10.2 PJ per
annum.
ATP 790P (Arrow 100%) – Daandine-2 Core Hole, Daandine Power Generation Project
This well was recently completed as part of the reserves certification process for the
Daandine power generation project. ATP 790P is located immediately south of the Kogan
North field and 40 km west of Dalby. The Daandine-2 core hole was designed to test the
extension of the Walloon coals 5km to the south east of those found in Kogan North. The
well found 24 metres of net coal in the Walloons and cores are currently being desorbed to
test the gas content level.
- 3 -
The Daandine Power Generation project is an Arrow owned, 27.4 MW power generation
project. Electricity will be sold to NSW electricity retailer Country Energy under a long term
Power Purchase Agreement. Ergon Energy will be conducting work to enable a connection
to the power grid and the supply of the 20 reciprocating gas engines is being negotiated with
an international engine manufacturer following a tender last year. First electricity sales are
planned for March 2006.
ATP 679P (Arrow 100%) – Boyne River-2 Core Hole
Following the completion of the Daandine-2 well the core rig was moved to the Boyne River
area, 60 km south west of Gladstone, to appraise the 2004 discovery made by the
Boyne River-1 well. The Boyne River-1 well discovered 70 metres of net coal in three zones
between 150m and 750m. The well was tested at a rate of over 2000 barrels of water per
day with gas flows to surface.
The Boyne River-2 core hole is located only 400m away from the discovery well and is
designed to test the gas content of the coals. A further flow test may also be performed.
The well was spudded this week and will be cored to a depth of 800m.
For and on behalf of the Board of Directors
JPK Marshall
Company Secretary
This announcement has been approved by the board of Arrow and the technical information herein
has been provided by a consultant (Dr R W Day) with more than 25 years experience in petroleum
exploration.
For further information contact:
Stephen Bizzell or Nick Davies
Phone (07) 3303 0650
Fax: (07) 3303 0651
E-Mail: [email protected]
Website: www.arrowenergy.com.au