Casino Rotary Club. Introduction to Casino Gas Project. 14 March 2011

Transcription

1 Casino Rotary Club Introduction to Casino Gas Project 14 March 2011

2 Overview of Meeting Introduction to Metgasco and the Gas Industry Geology of the Clarence Moreton Basin Q & A Opportunity Drilling & Completion Techniques Managing our Environmental Footprint Q & A Opportunity Tea & Coffee 2

3 Overview of Meeting Introduction to Metgasco and the Gas Industry Glenda McLoughlin, Chief Financial Officer Geology of the Clarence Moreton Basin Peter Stanmore, General Manager Exploration Q & A Opportunity Drilling & Completion Techniques Aidan Stewart, Casino Operations Manager Managing our Environmental Footprint Mick O Brien, Chief Operating Officer Q & A Opportunity Tea & Coffee 3

4 Introduction to the gas industry Natural gas is one of the cleanest, safest and most useful of all energy sources The gas industry has operated in Australia since 1906 Natural gas was first discovered in Australia in a water bore at Grafton racecourse in 1900 Casino had a gas works in town up until 1960 Gas distribution networks used to be in place in Casino, Lismore and Grafton Every mainland state in Australia is supplied by its own gas supply..except NSW Today NSW imports over 95% of our gas 4

5 Some natural gas facts Gas is primarily methane (CH 4 ) Gas is not toxic Gas can be dangerous if it builds up in enclosed spaces because it is highly flammable Gas does not smell Gas is supplied to homes and businesses in all Australian capital cities by gas distribution networks. Gas is used for: Cooking, heating and hot water heating in homes Running steam boilers for food processing Making fertiliser Manufacturing fabrics, glass, steel, plastics, paint and other products Generating electricity 5

6 Metgasco has never had a reportable environmental incident Concerns about recent media reports about emissions from some of our wells Our Bentley well had a minor gas leak producing around grams of methane per day This leak was from screwed connections at the wellhead To put into context - a single cow produces around 500 grams of methane per day Methane is not toxic and this minor fugitive emission posed no health or safety risk and was well below the level of being a reportable environmental incident in NSW We don t want any leaks at our wells, no matter how minor. 6

7 Introduction to Metgasco who we are Young Australian exploration company Listed on Australian Stock Exchange Around 6000 shareholders most are Australian private investors A number of shareholders from the Northern Rivers region Offices in Casino and Sydney All operations conducted from our Casino office where we have a number of key operating functions Exploration Field Operations Health Safety and Environmental Management Purchasing / Procurement Gas resources have been discovered: Conventional gas trapped in sandstone reservoirs Coal Seam Gas (also called unconventional gas) gas trapped in coal seam reservoirs 7

8 Where we work Focused on the Clarence Moreton basin a large underexplored gas basin We operate 3 exploration permits in the area Most of our work has been around the Casino area There are other companies exploring in the area 8

9 Our successful exploration effort growing gas reserves P 2P 3P 2, Metgasco gas reserves ,127 1,389 1,538 1P 2P 3P PJ , NSW/ACT consumes 131 PJ/pa Reserves have been certified by Mr Tim Hower of MHA Petroleum Consultants (Denver) who is a qualified person as defined under the ASX Listing Rule Reserves have been developed within the guidelines of the SPE. Mr Hower has consented to the use of the reserve figures in this presentation. 9

10 NSW needs new sources of energy NSW is heavily reliant on coal fired power we have one of the highest % of coal fired power in the world and one of the lowest % of gas fired generation NSW energy demand is forecast to increase by 60% over the next 25 years The NSW government forecasts that renewable energy supply will grow, but coal still forecast to supply 38% of power, and gas forecast to supply 30% of power Electricity power stations which use gas for fuel produce up to 70% less greenhouse gas emissions than coal fired power stations and use a fraction of the water 10

11 Our projects could deliver an economic boost to the Northern Rivers region Gas resources have been identified around Casino Metgasco hopes to commercialise this new energy resource Project Capex ($million) Construction jobs (direct ) Operating Jobs Gas sales to local businesses $ Richmond Valley Power Station $ Lions Way Pipeline $ Field Development $ Northern Rivers Power Station $ ~20 TOTAL $ ~100 11

12 Gas supply to local businesses Local businesses face high energy costs Only high priced bottled gas currently available Local businesses also face unreliable power supplies Power supplies in the northern rivers region are less reliable than the rest of the State Benefits of local energy supply: Keep local businesses competitive Attract new businesses to the area 12

13 Richmond Valley Power Station - under development 30MW gas fired power station Currently in development Enough power to supply 30,000 homes Will provide support to the electricity grid in northern NSW improving reliability Saving of 72,320 tonnes of CO 2 per year equivalent to taking around 14,000 cars off the road 13

14 Gas supply to an LNG project is a possibility We are also looking at the feasibility of supplying gas to export LNG projects 14

15 Committed to share the rewards of our success We are committed to sourcing equipment and services from local suppliers whenever possible Our purchasing function is located in Casino Approx 25% of our total spend is with local contractors Around 90 local businesses currently supply goods and services to Metgasco 15

16 Committed to hiring and training locals 15 staff located in Casino 600 people provided goods and services last year Structured training program through TAFE for local staff Support for the innovative Greenteam Alliance We provide internships for students in Environmental Science from Southern Cross University We have the potential to create hundreds of jobs in the local region keeping young people with their families The unemployment rate in the Northern Rivers region is 9.2% well above the NSW average of 6% 16

17 Working closely with our landowners We aim for a mutually beneficial co-existence We enter into voluntary land access agreements with the owners of the land where we operate. We make land access payments to landowners Payments vary depending on the type of activity undertaken Provides supplementary income to working farmers The importance of regular two-way communication 17

18 Supporting our local community Metgasco information booth at Primex Sponsorships: Casino Beef Week Family Day Bentley Art Show Westpac Helicopter Volunteers Casino Bulls Rugby Union Club Variety Childrens Christmas Party Northern Rivers Science and Engineering Challenge 18

19 Overview of Meeting Introduction to Metgasco and the Gas Industry Glenda McLoughlin, Chief Financial Officer Geology of the Clarence Moreton Basin Peter Stanmore, General Manager Exploration Q & A Opportunity Drilling & Completion Techniques Aidan Stewart, Casino Operations Manager Managing our Environmental Footprint Mick O Brien, Chief Operating Officer Q & A Opportunity Tea & Coffee 19

20 What is methane and how is it formed? Methane is produced by: Methane is formed from decomposing organic matter Decomposing organic matter in swamps and rivers Rubbish dumps Garden compost Cattle and other animals and also people Composition of air: You re breathing methane right now Nitrogen 78% Oxygen 21% Argon 0.93% Carbon dioxide 0.04% Methane % Others 0.028% (Neon, Helium, Krypton, Hydrogen, Xenon) 20

21 What is methane and how is it formed? Large river systems and inland lakes once existed along the eastern side of Australia where organic-rich sediment accumulated in sedimentary basins. These basins extend across the north and west of Queensland (the Cooper, Galilee, Bowen and Surat basins) to NSW (the Clarence Moreton basin) Many layers of sand, shale and some coal were deposited in these basins such that a significant overburden pressure developed which has compacted these sedimentary layers. This, combined with geothermal heat from the earth, has converted the organic material into coal as well as gas and oil which is either retained in the coal or expelled into the adjacent layers Some gas generated by this process migrates over time to the atmosphere Gas is also trapped and held in different rock formations: Trapped below impermeable rock in sandstone layers (conventional gas) Held in low permeability rocks by the pressure of burial (coal seam gas) 21

22 Difference between conventional and unconventional gas Unconventional Coal seam gas (also called Coal Bed Methane) Shale gas Tight gas Conventional Typically low permeability reservoirs that contain mainly methane Vast potential resource base covering large areas Relatively low exploration risk we know the coals are there and they contain gas Requires significant R&D to understand the geological controls and specialised technologies such as reservoir stimulation to unlock the resource to produce gas flows at commercial rates Peak water production is usually near start up Accumulations in medium to highly porous reservoirs with sufficient permeability to allow gas to flow to producing well. Typically needs trap and seal to retain the gas Higher exploration risk need to find the accumulation Peak water production later in life 22

23 Our exploration process Metgasco is exploring for gas which can be developed commercially in the: The Walloon Coal Measures which have proven to be productive in Qld Sandstone reservoirs below the coals which may have the necessary trap mechanisms 23

24 How do we go about our exploration process Coal Seam Gas Core wells These take physical samples of rocks which are analysed in the laboratory for physical properties such as gas content. Once all drilling and testing is completed, Metgasco rehabilitates the site to return it to pre-drilling state, Seismic Sometimes more information is required for us to understand the depth and geometry of the resource under the ground, so seismic data is acquired Pilot production wells These are drilled to demonstrate that gas can flow to surface in commercial volumes Production wells These are drilled to supply gas to customers Conventional Gas Seismic Seismic surveys are undertaken to identify structures that could hold gas under the ground Exploration wells Wells drilled deep into the ground to discover whether a structure contains gas or not Appraisal wells Wells designed to confirm the extent and size of the discovered gas accumulation Production wells These are drilled to supply gas to customers 24

25 So far we have discovered that. The Clarence Moreton basin contains a lot of gas, however some areas are expected to be better then others (referred to as Sweetspots ) Natural gas has been found in both coal seams and sandstone traps The Walloon coals in this part of the Clarence Moreton are different from Queensland They are relatively dry coals and only produce a fraction of the water of Qld CSG wells The quality of water produced is as good, if not better than elsewhere The gas content is very high quality, generally about 98% methane. Whereas, other gas projects can have high % of CO 2 25

26 Overview of Meeting Introduction to Metgasco and the Gas Industry Glenda McLoughlin, Chief Financial Officer Geology of the Clarence Moreton Basin Peter Stanmore, General Manager Exploration Q & A Opportunity Development Activities Mick O Brien, Chief Operating Officer Field Activities Aidan Stewart, Casino Operations Manager Q & A Opportunity Tea & Coffee 26

27 Overview of Meeting Introduction to Metgasco and the Gas Industry Glenda McLoughlin, Chief Financial Officer Geology of the Clarence Moreton Basin Peter Stanmore, General Manager Exploration Q & A Opportunity Drilling & Completion Techniques Aidan Stewart, Casino Operations Manager Operations and Safety Management Mick O Brien, Chief Operating Officer Q & A Opportunity Tea & Coffee 27

28 How we drill our wells Drilling a deep conventional well eg Kingfisher E01 Depth 2100 metres 28

29 How we protect and control our wells 17 ½ Hole 13 3 / 8 Casing ~20m 12 1/4 Hole 9 5/8 Casing ~150m 8 1/2 Hole 7 Casing ~500m 6 1/8 Hole ~600m to 1500m 29

30 What is fraccing? Fracture stimulation (fraccing) is a process that uses pressure to create an artificial fracture network to allow gas to flow to a well Sometimes used to improve the gas production rate from the well Established industry practice Separate to drilling Done safely in the US for over 60 years and in Australia since 1968 Extensively studied in many countries A major study by the US Environmental Protection Agency found: the injection of hydraulic fracturing fluids into coalbed methane wells poses little or no threat to Underground Sources of Drinking Water The US EPA announced in June 2010: Natural gas plays a key role in our nation s clean energy future and hydraulic fracturing is one way of accessing this vital resource. The US EPA is currently reviewing the impact of fraccing in shales given the significant expansion in shale gas drilling activity. Report to be completed in Contents of fluids used in fraccing are not secret and can be found on the APPEA website 30

31 How are our coal seam gas wells drilled? Horizontal drilling (eg Harrier 01) No fraccing 31

32 Small rigs low impact New technologies enable in-seam steering 32

33 How is coal seam gas extracted? 33

34 What happens to produced water? Water from production wells is stored onsite in tanks Transferred by truck to lined holding ponds 34

35 Returning wellsites back to original condition 35

36 Overview of Meeting Introduction to Metgasco and the Gas Industry Glenda McLoughlin, Chief Financial Officer Geology of the Clarence Moreton Basin Peter Stanmore, General Manager Exploration Q & A Opportunity Drilling & Completion Techniques Aidan Stewart, Casino Operations Manager Managing our Environmental Footprint Mick O Brien, Chief Operating Officer Q & A Opportunity Tea & Coffee 36

37 Managing our environmental footprint Incorporate environmental management systems as part of our critical business activities Complying with or exceeding all applicable environmental laws, statutory obligations and relevant voluntary codes of practice Monitoring and setting measurable targets for environmental performance Periodically reviewing and maintaining our Environmental Policy and Procedures Metgasco is committed to ensuring our activities have minimal impact 37

38 Environmental Management Framework- Exploration Petroleum (Onshore) Act Industry and Investment Environmental Planning and Assessment Act Department of Planning - Part 5 Local Environment Plans State Environmental Planning Policies National Parks and Wildlife Act Native Vegetation Act Rivers and Foreshores Improvement Act Rural Fires Act Water Management Act and Water Act 1912 Review of Environmental Factors Our activities are tightly regulated 38

39 Environmental Management Framework Projects Environmental Planning and Assessment Act Part 3A Department of Planning coordinates Local Environment Plans State Environmental Planning Policies (SEPP) Environmental Assessment Public Display and Community consultation Extensive public consultation process prior to any development being approved 39

40 We take our environmental responsibilities seriously We operate under robust safety and environmental regulation Environmental considerations in: Well design & drilling techniques Well locations Ongoing operations Well site rehabilitation We have processes in place to check and maintain our wells We use industry standard gas detection equipment This is set at a level to assess safe working conditions Our Casino based field staff check our producing wells daily Recent fugitive emissions from our wells were from core holes drilled to collect samples of rocks We regularly check our non-producing exploration wells 40

41 Our Water Management Framework Avoiding any impact on groundwater and aquifers Managing produced water - from coal seams Managing fluids produced as a by-product of our activities generally not seen as an issue Drilling fluids Process water Process plant area run off Collected rain water 41

42 Understanding groundwater impacts Where are our local groundwater sources? Alluvium 0-20 metres Grafton Formation metres Kangaroo Creek metres 42

43 Metgasco wells don t tap groundwater sources currently in use Existing Water Bores within 10km Casino Depths (metres) No Alluvium 0 to Grafton Formation 20 to Kangaroo Creek 100 to Walloon Coal Measures 450 to 680 None Unknown 9 Total

44 The quality of water is different at every location Typical QLD Metgasco Min Mean Max Min Mean Max CP11 Ph Conductivity us/cm TDS mg/l Ca mg/l Mg mg/l Na mg/l K mg/l Cl mg/l Rate kl/mmscf Water production rates also vary our wells produce low volumes of water by comparison 44

45 Constant Monitoring Database of 400 samples Allows tracking of water source We know which aquifer the water comes from Salt is not salt Approximately 10 ML produced to date peak Richmond River flow 2009 flood of 1.3 ML/sec. Typical Analysis Know more about our water than about the water we drink Typical salt deposition rates 30 kg/ha/yr Prospect Number Day (DD) Month (MM) Year (YY) Activity (FT or GT or SI) MWOB GT 1 MWOB GT 1 MWOB GT 1 MWOB GT 1 MWOB GT 1 MWOB GT 1 MWOB GT 1 MWOB GT 1 MWOB GT 1 MWOB GT 1 MWOB GT 1 MWOB GT 1 MWOB GT 1 MWOB GT 1 MWOB GT 1 MWOB GT 1 MWOB GT 1 MWOB GT 1 MWOB GT 1 MWOB GT 1 MWOB GT 1 MWOB GT 1 MWOB GT 1 MWOB GT 1 MWOB GT 1 MWOB GT 1 MWOB GT 1 MWOB GT 1 Sequence Sample Number Date Sent MWOB04G 16-April MWOB01G 17-August MWOB02G 17-August MWOB03G 17-August MWOB04G 17-August MWOB05G 17-August MWOB06G 17-August MWOB08G 17-August MWOB09G 17-August MWOB01G 07-November MWOB02G 07-November MWOB03G 07-November MWOB04G 07-November MWOB05G 07-November MWOB06G 07-November MWOB08G 07-November MWOB09G 07-November MWOB01G 08-December MWOB02G 08-December MWOB03G 08-December MWOB04G 08-December MWOB05G 08-December MWOB06G 08-December MWOB08G 08-December MWOB09G 08-December MWOB01G 08-January MWOB02G 08-January MWOB03G 08-January

46 Responsible water management Options for beneficial re-use in production Desalination Reverse Osmosis - Brine Disposal Reinjection for pressure maintenance Irrigation & Stock use What are other people doing US initially few controls on water disposal - allowed into rivers Canada better some very good studies and procedures developed Australia as you would expect much more vigilant about water 46

47 Metgasco aims to find and commercialise a new source of energy for the Northern Rivers region We are committed to: Operating safely Ensuring our operations are environmentally sustainable Respecting and balancing the interests of landowners Being open and transparent with the community in which we operate Delivering benefits to our community 47

48 Thank you Contact Information: Metgasco Casino Office: Operations Manager Land Owners Health, Safety & Environment Local Supply Opportunities Aidan Stewart Hamish Ramsey Steve Gallop Angela Johnston Metgasco Sydney Office Media and Shareholders Employment Queries Glenda McLoughlin Donna Tunstall

49 Water Management Approach Zero discharge of water Pond walls will be above 1 in 100 year flood level Undertake a Groundwater Monitoring Program Annual assessment Identification of trigger levels Contingency measures Undertake a Water Quality Monitoring Program Schedule and program for monitoring Opportunities for beneficial reuse Contingency measures for higher or lower water production rates 49

50 Project impact Forecast water production rates for typical 30 well development 0 to 5 years, 140 m 3 /d; 5 to 15 years, 90 m 3 /d; and, 15 to 25 years, 40 m 3 /d. KCBL modelling for the Walloons over a 25 by 28 km showed: - After 5 years the maximum drawdown is approximately 1.0m After 15 years 1.5m After 25 years 1.3m It was assumed that there was no recharge Recommendation Needs to be monitored and predictions reconfirmed 50

51 Aquifer recharge Recharge of the Alluvial is likely to be direct infiltration from rainfall and flood events Rainfall recharge of the Gatton is also likely where alluvial are not present Otherwise likely to be vertical seepage Recharge of the Walloons likely to be: - Rainfall recharge where the Walloons come to the surface at the basin margins Vertical seepage from overlying formations water quality is substantially different Neither of these are likely to be rapid or substantial 51

52 Study conclusions Not sufficient data in DNR database to establish regional water flows Likely that shallow alluvial aquifers mimic surface trends and flow toward and along major watercourses Deep aquifers may not follow this trend Most shallow bores show direct response to higher rainfall events but typically return quite quickly to a stable base line level Indicates that there is not a significant hydraulic continuity with any other aquifer Records of the Grafton formation have a range of groundwater levels broadly consistent with levels in the alluvial sequences. Likely that these formations are in approximate hydraulic equilibrium although the transfer of water between the two will be controlled There are only two recorded levels in the Kangaroo Creek sequence 52