Presentation CSG Forum – Desert Channels & RAPAD Barcaldine – Sat 21 April 2012 Longreach – Sun 22 April 2012
Contents • Who we are and where we operate • What we do • What is coal seam gas • What is exploration and production • Brief outline of the water baseline study • What lies in the future
The basin forum - Who we are • The forum is an informal group of coal seam gas exploration companies which formed about 18 months ago • Each has petroleum exploration tenements in the Galilee Basin • There are eight founding companies • An additional two companies have joined the group • Initially the group formed to jointly fund a baseline water assessment
Membership 1. AGL Energy Ltd 2. Blue Energy Limited 3. Comet Ridge Limited 4. Exoma Energy Limited 5. Galilee Energy Limited 6. Origin Energy Limited 7. Queensland Energy Resources Limited 8. WestSide Corporation Limited 9. Resolve Geo Pty Ltd 10. Pangaea Galilee Pty Ltd
Where we are – the Galilee Basin
What we do • The group has commissioned RPS to undertake a Baseline Water Study of the Galilee Basin • Once complete the group will review further options for increasing the shared knowledge on water • Increasingly the group is also engaging with stakeholders such as RAPAD, MITEZ and AgForce
What is coal seam gas? • Coal seam gas is natural gas, used by power stations, industry and consumers throughout the state • Coal seam gas is dominantly methane [CH 4 ] • The gas is adsorbed onto coal surfaces and held in place by hydrostatic pressure • Gas comes to the surface once that hydrostatic pressure is released by producing water
What is coal seam gas (cont’d)? • Over 95% of the gas produced in Queensland is coal seam gas [730 TJ total, of which 690 TJ is CSG] • Queensland gas consumption is approximately 650 TJ/day • Comprising about 50% power generation, 40% major industrial use and 10% retail consumption • CSG comprises about 30% of total Eastern Australian gas production
How do companies obtain tenure? • The State Government releases land for competitive bids under the petroleum legislation • These bids are assessed based on the suitability of the proposed work program and the capability of the applicant • The successful tenderer must then apply for environmental approvals prior to the grant of the exploration tenure • The proposed work program must be completed by the company in accordance with prescribed conditions
What is exploration? • Each company is currently undertaking exploration, which may involve drilling and seismic • The purpose of exploration is to confirm the presence of coal, the quality of the coal and the gas it contains, and to expand our understanding of the basin • This includes our understanding of the hydrogeology of the basin • Initial drilling will not be focussed on producing any water or gas to the surface • When exploration results are encouraging, appraisal programs, which may include pilot wells, are undertaken to obtain further information on production potential
What is appraisal? • Preliminary exploration is followed by the appraisal stage of exploration • This activity continues to occur on the exploration tenure • For coal seam gas explorers, appraisal generally involves drilling additional wells to commence a pilot production test • Only one project is currently undertaking appraisal activity in the Galilee Basin • During pilot production, water is pumped to the surface to reduce the hydrostatic pressure which holds the gas onto the coal surface • During this phase, important information which will inform future development is obtained on: – water quality and quantity and – gas producibility
What is production? • It is not possible for a company to gain the necessary certification of reserves for a production lease without undertaking pilot tests on the exploration tenure • Following this activity a company would hope to have sufficient information to meet the requirements of a production tenure application (petroleum lease) • Production cannot occur except on a Petroleum Lease • This process requires significant additional environmental approvals prior to the grant of the petroleum lease
Future development ? • Depends on the results of exploration and testing • Would require significant supporting infrastructure, including pipelines, compressor stations, water handling facilities • Would require upgrading of exploration permits to production permits • Would require significant environmental approvals • We want to achieve a development framework that can benefit the community as well as achieve individual company goals
CSG Reserve Development – Key Steps Production Exploration Phase PROSPECTIVE CONTINGENT POSSIBLE PROBABLE PROVEN RESOURCE RESOURCE Geological Core-holes Core-holes Core-holes Development wells Geological (Gas in place?) Field development Pilot wells review (Gas & water review Seismic surveys productivity?) (Volumetrics?) Source APPEA
Ecology: CSG and the Land CSG Then Lauren field in the Surat Basin was developed the way it was, during the drought years, in a manner that fitted both the landholder and the CSG company at the time. CSG Now The Berwyndale field in the Surat Basin has been developed more recently, and demonstrates how CSG proponents work closely with landholders to optimise the layout of infrastructure to minimise the impact on their farm productivity. Source APPEA
Cultural Heritage • We have a Cultural Heritage Duty of Care under the Aboriginal Cultural Heritage Act 2003 • Each CSG company works with local Cultural Heritage or Native Title groups (as appropriate) in relation to ensuring no Cultural Heritage harm in relation to our activities Source AGL
A Case Study: Wells and Agriculture can co-exist Qld NSW Texas Area (‘000 sq km) 1,731 802 696 Gross Farm Product* ($Bn) 9.1 8.3 9.7 Petroleum Wells 7,000 249 218,556 *Source: ABS 1367.0 State and Terr Stat Indicators for 2009/10; 2009 Texas Agriculture Statistics, USDA Source APPEA
What is the Galilee Basin? • The Galilee Basin is a geological basin comprised of Permian- Triassic aged sediments • It is overlain by a younger geological basin, the Eromanga Basin • The Great Artesian Basin is a hydrogeological basin which includes the Eromanga Basin and the highest aquifer within the Galilee Basin (Clematis Sandstone)
The Great Artesian Basin Source: Galilee Energy Source: DERM Queensland
Stratigraphic relationship L R Eromanga Basin Winton Fm Hutton ss Mackunda Fm Moolayember Fm Allaru ms Clematis ss Wallumbilla Fm Dunda beds Cadna-Owie Fm Rewan Fm Hooray ss Galilee Basin Westbourne Fm Betts Creek Beds Adori ss Colinlea ss Birkhead Fm Aramac coal measures Jochmus Fm Jericho Fm R L Maneroo Platform Koburra Trough Source Galilee Energy * Source: Adapted from RPS Water Study
ML/year. projects is 75,000 for the Surat Basin production estimate average CSG water Actual industry reported in media. usage estimates Many misleading CSG Water Production Source APPEA Annual GAB Recharge Estimated Total GAB Use Current Surat Basin Groundwater Use Typical APLNG Water Production Surat Basin Surface Water Use Average Water Production for CSG Industry in Surat
Some Key Points • The coal targets in the Galilee Basin are stratigraphically much lower than the commonly used aquifers • Galilee Basin coal formations are generally not used as aquifers • We have a sound understanding of the geometry of the basin • Further exploration (seismic and drilling) will continue to add to basin understanding
Our target compared to many water bores Source Exoma Energy
Well completion schematic Source WestSide Corporation
Potential Impact of Hydraulic Fracturing Activities • Hydraulic Fracture Stimulation is a carefully designed, closely monitored and a highly regulated activity. • Fracs designed to be contained to coal measures • Vertical growth is confined by mudstones • Normally coals are significantly deeper than aquifers • Fracture propagation assessment undertaken with microseismic monitoring • Gel Frac – Water Guar Gum, common household chemicals and sand • Water frac – water, salt, sand • Frac fluids recovered (& monitored) and collected in tanks or lined ponds. Source Origin Energy
Well construction key points • Well construction is robust and is subject to regulation • Wells are specifically designed to isolate the aquifers; we have no interest in producing water from any formation other than the coal itself • In November the Government issued a Code of Practice for Constructing and Abandoning CSG wells
Where the baseline study is up to • Individual water quality information interpreted • Definition of hydrogeology of Eromanga and Galilee Basin sediments in the study area • Identification of data gaps • Identification of key monitoring bore locations • The study will be released in May/June • It will form the basis for continued monitoring, exploration and modelling
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