Central Petroleum (ASX: CTP) has advised that subject to the discovery and proving of sufficient reserves and flow rates, relatively low volumes of helium may be commercially extracted and sold from the company’s interest areas in central Australia.
The company plans to achieve this via the utilisation of field based modular extraction plants coupled with centralised purification and liquefaction plants.
The company is basing its on a report tendered to it by M.E.T.T.S. Pty. Ltd., Duncan Seddon and Associates Pty. Ltd. and NEGOTIACTION Pty. Ltd.
Dependent on quality, volumes and prices of helium and whether the product is sold FOB Darwin or CIF to a nominal North Asian destination the main conclusions of the report are that:
There is a robust international market for helium which sells at bulk wholesale prices for up to AU$200/thousand cubic feet equivalent (Grade A 99.99% pure, liquid form).
Global average helium prices are expected to rise at 5-6% per annum for the next ten years.
Annual demand growth has risen as high as 16% in China in recent years and with no expected domestic commercial production China is likely to remain dependent on imported helium.
About one third of the world’s demand for helium recently was supplied from the US Federal Reserve which is expected to only last for a further 10-15 years.
Estimates of new extraction plants required vary from 11 to 19 by the year 2020 at an estimated 5-6% per annum projected growth in demand.
Asia is the fastest growing helium market in the world with total sales of 1,130 million cubic feet projected for the year 2010, up from 596 million cubic feet in 2005.
Total global demand for helium is in excess of 6,000 million cubic feet per annum.
Demand growth is primarily being driven by the electronics industry (particularly in flat panel display production).
Also, fourth generation gas cooled nuclear plants are projected to add significantly to demand growth (benefitting from helium’s ability to contribute to increase electrical efficiency from 30% to 50% as well as safety and environmental considerations).
The capital expenditure (capex) of a commercial helium extraction plant processing 20 million cubic feet per annum of total gas feedstock, inclusive of owners’ costs, royalties, equity finance, commissions, insurance and other costs associated with plant and ancillary equipment would be about AU$420 million.
The operating expenditure (opex) would vary between AU$33-38 million per annum.
The gross revenue would vary from AU$98-$143 million. The net present value (NPV) of such a project at an 8% discount rate could range between AU$111 and AU$556 million.
The report’s conclusions are based on the assumptions that gas of a similar composition to that found in the Magee 1 well is discovered and a subsequent field or fields produced at a total of 20 million cubic feet per day of total gas (inclusive of all gaseous components).
Central, with its Joint Venture Participant, He Nuclear Ltd, plans conditionally to drill at least one well during 2010 (The Magee 2 well) targeting gas, condensate and helium.
Within the He Nuclear Joint Venture prospect blocks there are two seismically defined prospects. The Magee prospect may host up to 800 billion cubic feet of gas (BCFG) and up to 15 billion cubic feet of helium in undiscovered gas initially in place (UGIIP).
The Mt Kitty prospect may host up to 3 trillion cubic feet of gas (TCFG) and up to 185 billion cubic feet of helium UGIIP. The Magee prospect was drilled in 1992 and produced a flow of gas to surface that included 6.2% helium, gas and condensate credits. The estimates quoted above relate to undiscovered gas initially in place (UGIIP) and is at the “high” estimate.
CTP Price at posting:
30.0¢ Sentiment: Buy Disclosure: Held
