More CSG consolidation in the works? -------------------------------------------------------------------------------- Tuesday, 1 November 2011 Bevis Yeo
WITH Santos’ acquisition of Eastern Star Gas crossing its biggest and near-final hurdle and Bow Energy set to be acquired by Arrow Energy, will there be further consolidation in the east coast coal seam gas sector?
It is tempting to just say no, as at least one source told Energy News Premium but let’s take a look at some of the CSG juniors and play a little guessing game.
First up on the stands is Metgasco, which is the target of at least some takeover rumours though rather than a major CSG-LNG player, the rumoured buyer is Liquefied Natural Gas Limited.
Metgasco currently holds 2.7 petajoules of proved gas and 2542 of proved, probable and possible reserves in the Clarence Moreton Basin in northern New South Wales.
It is also the largest remaining resource that remains uncommitted, making it an ideal fit for LNG Ltd, which has been lining up regulatory approvals and putting in place the pieces of the puzzle needed to make its mid-sized LNG plant at Fisherman’s Landing work.
All the pieces, that is, except the all-essential gas supply, which of course is what Metgasco would bring to the table.
Metgasco’s multi-lateral CSG pilots have also performed well with its Harrier P01 and Corella P18 pilots performing better than expected while de-watering.
Further reserves could be established once this occurs along with the three additional pilots it is planning to drill next year.
As a side effect, the multi-laterals could help reduce the impact of Metgasco’s operations on its surrounds, as it could mean less wells to take advantage of the same area and possibly reduce the opposition from local landowners.
To top it off, Metgaso has the Kingfisher conventional gas field it discovered early last year and is currently planning new seismic to confirm it is part of the Greater Mackellar structure.
Of course, in the CSG equation we are examining, conventional gas does not really warrant consideration.
Metgasco is also actively investigating its own LNG project development options, though this could still wind up as an alliance with, or acquisition by LNG Ltd, or possibly one of the major players.
Meanwhile, Westside Corporation, already sitting on the producing Meridian SeamGas project that has proved and probable reserves of 433PJ, has been peering at the deeper coals in the Bowen Basin.
The coals, located at a depth of 1000-1500m, could add another 3-4 trillion cubic feet of in-place gas resource to the company’s existing resources though Westside will only establish this once it starts drilling wells.
The company’s existing resource does not take into account its Galilee Basin assets, which are now the target of a drilling campaign.
Also in the Bowen is Molopo Energy, which has built up a 2P reserves position of 328 billion cubic feet of gas centred around its Mungi gas field.
Where it is of interest here is the company’s stated interest in selling its Australian CSG assets, giving majors looking for a quick snack or juniors aiming to build their portfolio a potential (and willing) target.
Next up is Dart Energy, which owns the distinction of being the second spin-off company from Arrow Energy. The first, Bow, was split off as the vehicle for Arrow’s conventional oil and gas assets and after acquiring and proving up its own CSG reserves, is now set to return to the fold – albeit one now owned by Shell and PetroChina.
Having noticed its international assets were not being priced right by Australian investors, the probably miffed directors of Dart said in August it would carry out its own spin-off, removing the same international assets Arrow had dropped and listing them on the Singapore Stock Exchange.
Such a move will leave the company with its seven CSG permits in NSW, for which it has so far certified in-place gas resources of over 30 trillion cubic feet of gas.
While its work is still in its early stages, the bulk of the identified in-place resources are located in the Gunnedah Basin, adjacent to a number of permits held by ESG.
Besides these companies, there are also a number of junior companies, such as Comet Ridge, that have established contingent resources and are working up to prove up reserves, though I will go out on a limb and say these companies are at much too early a stage in their exploration and appraisal work to be viable acquisition targets yet.
So will there be more consolidation in the CSG sector?
Possibly, any of the juniors could be a welcome target if their reserves can be proved up and are where a potential buyer thinks is a good place for them to be.
Developing CSG in a substantial manner is also proving to be a challenging prospect both from financial and logistical points and unless a junior is content with producing for the domestic gas market, it may find the only way to commercialise its resources in any major manner may well be to tie up or be bought up by one of the big players.
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