sto fid by 30-jun & what it means for esg, page-29

JT,

they are important considerations that you have mentioned.

ESGs piloted flow rates have not yet peaked. If you read the note on the BBW West flows, they discuss about 500m head of water to come off the coal seam. This is is significant as the peak flow rate will not be established until they have destressed the seam. The early and high flow rates indicate a few very positive aspects of the well; that the seam is fully saturated which means that flows and most likely free gas will be hit as soon as they open the chokes and start the water pumping. It also indicates that the coals have good interconnectivity and that they are well situated to 'relax' and let the gas go.

The seam thickness at BBW West is not significant (relative to bohena) but considering the flow rate and drawdown area, it will still likely have a reasonable well life and make it very very economic.

The results from the BBW (Bohena) pilot continue to be disappointing and I would have liked to have seen much much higher flow rates from this and sooner. I think I have said before that I suspect there may be some unreported blockages impacting operations as I dont recall DC or anyone discussing this year the ongoing operations at the pilot.

From the peak flows that have been mentioned by some analysts you would expect those rates to ease off with time. Something which I am yet to read up on is the lifetime for the lateral wells. I would suspect that the lifetime for these is considerably longer than a vertical well which would help with ongoing cash flows for a program.

I think flows from 1 to 2 MMSCFd have come out of the sweet spots that Santos and origin have hit in the surat. This is really good as those high initial flows are what are needed to support the big LNG programs they have.

You have to remember that they are talking about first gas from the STO train in 2014. The LNG flows (not considering pressurising and power requirements) needed to feed the plant would only be half the 1200TJ you have mnentioned. They already have a considerable amount of wells and production in QLD, so 'ramping up' from there is not as big as an effort. The large OCGT capacity they have building in SE QLD will also help economically 'dispose' of some of this ramp gas. I think Origins darling downs plant (~630MW) is due for commmissioning in the coming months.

I think Santos will be aiming to shoot well over that figure if they intend on getting the two trains up. you are right though, they can distribute the supply a bit and get help from other operators to distribute both the management of gas production, as well as the hefty capital requirements.

Remember, ESG is a long way from QLD and there are a lot of bigger and more advanced players standing in the line in front of them in terms of technical ability(proven), infrastructure (in place) and location(400-600km closer) - namely Origin.

Cheers,

SF