Carbon Energy Poised to Become a Major Gas Player Following an 83% Increase in 2P UCG Gas Reserves

Transcription

1 ASX / Media Announcement Level 9, 301 Coronation Drive, Milton QLD 4064 Australia PO Box 2118, Toowong DC QLD 4066 Australia phone + 61 (0) fax + 61 (0) Carbon Energy Limited ABN Carbon Energy (Operations) Pty Ltd ABN Carbon Energy Poised to Become a Major Gas Player Following an 83% Increase in 2P UCG Gas Reserves 83% increase in 2P UCG gas Reserve to 1,362 PJ Carbon Energy could potentially be a significant contributor to gas production in Queensland Potential to play an important role in addressing foreshadowed Eastern States gas shortfall Carbon Energy (ASX:CNX, OTCQX:CNXAY) today announced an 83% increase in the Company s proved and probable (2P) Underground Coal Gasification (UCG) gas Reserves at its Bloodwood Creek site. Carbon Energy has the potential to become a major gas provider in the Queensland market. The Company s 2P UCG gas Reserve has increased from 743PJ to 1,362 PJ and ranks Carbon Energy as potentially one of the largest gas producers in Queensland. This reserve confirms the scale of the opportunity UCG presents as a new source to meet growing energy demands on the eastern seaboard. Carbon Energy s CEO Morné Engelbrecht said, This is an important upgrade which positions Carbon Energy as the leader of the Australian Underground Coal Gasification industry. Carbon Energy is poised to potentially play a key role in meeting the emerging shortfall in gas supply for Eastern Australia. Carbon Energy s unique keyseam UCG technology delivers up to an estimated 20 times more energy from an area than other gas extraction techniques. The commercial potential of our proven technology is understood by our foreign joint venture partners in China and South America. We are on the cusp of international commercialisation of UCG technology that we have proven in Queensland he said.

2 South East Queensland s coal rich Surat Basin is approximately 110,000 km 2 and reportedly has 28,422 PJ in identified 2P reserves 1. Carbon Energy s 1,362 PJ 2P UCG gas Reserve is from one of five identified coal seam areas in the Company s Mineral Development Licence (MDL) which covers approximately 30 km 2. This equates to more than 33 million GJ per km 2 of recoverable energy. This further represents approximately 5% of available 2P Reserves in the Surat Basin from an area representing 0.03% of the total Surat Basin. Carbon Energy s 2P UCG gas Reserve was independently certified by MHA Petroleum Consultants (MHA) (report attached). Carbon Energy s keyseam UCG technology was initially developed by the CSIRO, a shareholder in the Company. Carbon Energy s UCG gas is a low-cost, low-emission, low-impact energy alternative which can be an economical feedstock to downstream markets including lowemission electricity, pipeline quality gas, fertiliser and industrial explosives and liquid fuels. Earlier this year various concept studies were completed on the Company s 2P UCG gas Reserve which confirmed the production of both ammonia and Synthetic Natural Gas (SNG) as the most attractive downstream options to deliver maximum value to the Company (see ASX announcement 14 June 2013). The Company s UCG gas asset is currently being prepared for commercialisation after 5 years of in-field trials. In-line with recommendations from the Independent Scientific Panel Report commissioned by the Queensland Government, the Company is currently developing a rehabilitation plan in conjunction with the Queensland Government for the second trial panel at the Bloodwood Creek site. This work is a vital step in the commercialisation process and is anticipated to provide the Government with confidence that Carbon Energy can operate its technology in an environmentally safe manner as has already been demonstrated through the trials. Mr Engelbrecht said, We are pleased with the progress of the rehabilitation plans and are confident that a UCG regulatory regime can be established in Queensland which will allow Carbon Energy to commence the commercialisation of this existing UCG gas Reserve. The UCG gas Reserve positioned on MDL 374 is within the Company s wholly 1 Source 2 MDL374 renewal was submitted and received by the Department and are in the process of reviewing it. 2

3 owned 1400km 2 of exploration leases at Bloodwood Creek in Queensland s Surat Basin. The Bloodwood Creek site is located near commercial infrastructure including major power lines, the Roma-Brisbane Gas Pipeline, industrial-grade water supply, roads and rail as well as skilled labour. ENDS For and on behalf of the Board Morné Engelbrecht Managing Director & Chief Executive Officer For more information please contact Jodie Springer on or refer to our website at 3

4 Carbon Energy 301 Coronation Drive, Level 9 Milton QLD 4064 Australia Re: Updated Reserves Certification MDL374 Surat Basin, Queensland, Australia Dear Mr. Haines: As requested, MHA Petroleum Consultants LLC ( MHA ) has updated our estimates of the Underground Coal Gasification ( UCG ) reserves attributable to the gross (100 percent) ownership interest in certain coal properties located within MDL374 in the eastern Surat Basin of Queensland, Australia. This evaluation reflects a revision to MHA s prior estimates of reserves and contingent resources as documented in our report to Carbon Energy dated 8 December The estimates of reserves presented in this report have been prepared in accordance with the definitions and guidelines set forth in the 2007 Petroleum Resources Management System ( PRMS ) and the 2011 Guidelines for Application of the PRMS, approved by the Society of Petroleum Engineers. MHA estimates the UCG reserves volumes attributable to the gross (100 percent) interest in MDL374 to be: Category Gross Gas Volumes (PJ) 1P Reserves P Reserves P Reserves Notes: 1P Reserves = Proved 2P Reserves = Proved + Probable 3P Reserves = Proved + Probable + Possible UCG Energy conversion factor used was GJ per tonne of coal It has been a pleasure to perform this evaluation for Carbon Energy. If you have any questions regarding this evaluation, or if additional information is needed, please feel free to contact me. Sincerely, Timothy L. Hower, PE Chief Executive Officer

5 Introduction Carbon Energy Limited ( Carbon Energy ) currently holds MDL374, which is located in the eastern Surat Basin of Queensland, Australia, approximately 30 km west of the township of Dalby. Within MDL374 is the Bloodwood Creek pilot site where Carbon Energy has been conducting trials of the UCG process. Carbon Energy has developed UCG expertise to produce syngas. This produced gas is a mixture of the products from the reactions associated with the coal gasification, and includes methane, hydrogen, carbon monoxide, carbon dioxide and various higher hydrocarbons. The produced gas is suitable for power generation in a syngas turbine. Carbon Energy has conducted two UCG pilot tests in the Bloodwood Creek area. The company successfully exported electricity generated from the syngas to Ergon Energy Corporation Ltd s local electricity grid, up to the limit of 1.5MW as permitted under the Environmental Authority. Based on the recent results from the Panel 2 pilot, MHA was asked to re-evaluate the reserves volumes associated with MDL374. Estimates of UCG Reserves in MDL374 MHA evaluated the recent results from the Panel 2 UCG pilot, as well as numerous technical reports and all available data from the coals in the study area. The approach used by MHA to estimate the reserves in MDL374 was as follows: 1. Coal in place (Mt) was taken from the March 2013 Surat Geological Modeling Report prepared by GeoConsult. The GeoConsult evaluation estimated a total of 243 Mt of coal (Inferred Resource) within the Macalister Upper and Macalister Main seams. 2. A gross volume of syngas in place was calculated using a syngas yield of GJ per tonne of in-situ coal. This value was calculated from the data collected from the Panel 2 UCG pilot. The energy production from the pilot averaged 413 GJ/day. The amount of in-situ coal gasified during the pilot test was 24.7 tonnes/day, which yields a value of GJ per tonne of in-situ coal. 3. Recoverable syngas volumes were determined by applying a process recovery efficiency value and a geologic risk factor to the gross syngas volumes. The process recovery efficiency was assumed to be 85% based on proof of concept reviews commissioned by Carbon Energy. In addition, a geologic risk factor within MDL374 was assumed to be 95%. This was based on a September 2012 Information Memorandum prepared by Moultrie Group. 4. The 1P reserves volumes have not changed from the prior MHA report. 1P reserves volumes remain at 11 PJ. The 2P reserves volumes were estimated within the area having the highest well density and control within MDL374. This 2P area is calculated at km 2 and is illustrated in Figure 1. 3P reserves volumes were then assigned to the remainder of the coal volumes within MDL374 that were not included in the 2P estimate. MHA Petroleum Consultants LLC Page 2

6 Determination of Commerciality To assess the commercial feasibility of a syngas project at MDL374, MHA reviewed numerous Commercialization Studies commissioned by Carbon Energy. Based on the results of these studies, and the estimated capital and operating costs for a syngas project, as well as the anticipated equivalent gas pricing for the generated syngas, it is the opinion of MHA that the development of the UCG reserves in MDL374 are commercially viable. MHA did not perform any field inspection of the properties, nor did we examine the mechanical operation or condition of the pilot panel and its related facilities. MHA did not investigate any possible environmental liabilities related to the properties. Statement of Risk The accuracy of reserves and economic evaluations is always subject to uncertainty. The magnitude of this uncertainty is generally proportional to the quantity and quality of data available for analysis. As a project matures and new information becomes available, revisions may be required which may either increase or decrease the previous reserve assignments. Sometimes these revisions may result not only in a significant change to the reserves and value assigned to a property, but also may impact the total company reserve and economic status. The reserves estimates contained in this report were based upon a technical analysis of the available data using accepted engineering principles. However, they must be accepted with the understanding that further information and future performance subsequent to the date of the estimate may justify their revision. It is MHA s opinion that the estimated proven reserves and other reserve information as specified in this report are reasonable, and have been prepared in accordance with generally accepted petroleum engineering and evaluation principles. Notwithstanding the aforementioned opinion, MHA makes no warranties concerning the data and interpretations of such data. In no event shall MHA be liable for any special or consequential damages arising from Carbon Energy s use of MHA s interpretation, reports, or services produced as a result of its work for Carbon Energy. Neither MHA, nor any of our employees have any interest in the subject properties and neither the employment to do this work, nor the compensation, is contingent on our estimates of reserves for the properties in this report. MHA Petroleum Consultants LLC Page 3

7 Figure 1 2P UCG Reserves Area MHA Petroleum Consultants LLC Page 4