Statement by Chairman of State Gas Limited to shareholders

Brisbane, Australia (ABN Newswire) – State Gas Limited (ASX:GAS) (OTCMKTS:STGSF) strives to be as responsive as possible to energy market dynamics and has therefore formulated a strategic response to signals from the market.

The main themes evident in the market are high gas and electricity prices, the need for energy security in Australia and elsewhere, and increased levels of volatility in the domestic gas market. The main causes are twofold, namely: the war in Ukraine, which highlighted the need for energy security; and recognition of the fundamental role played by natural gas as a key enabler of the energy transition. The intermittent nature of renewables requires the immediate response that gas generation can provide when the wind isn’t blowing or the sun isn’t shining. It should also be remembered that gas is an essential raw material for many industrial processes, the production of fertilizers, heating, and is a fundamental element of the products we use on a daily basis.

State Gas is fortunate to own both conventional gas and coal gas assets. CSG extraction is optimal when gas requirements are constant and constant. Conventional gas production, on the other hand, can be stopped and started at will. These characteristics facilitate our vision: to use our CSG as a base load to underwrite development infrastructures, while reserving the production of conventional gas which is more reactive and flexible to surf on gas price peaks.

We envision a three-stage development over the next five years, with the first stage being the trucking of compressed natural gas and the second and third stages involving the development and improvement of a physical pipeline.

We are now executing the first stage: our plan to produce, compress, transport and sell conventional gas from PL 231. We expect to deliver the gas in the first half of next year, in time for the next winter peak. Spot gas prices over the past six months have averaged over $26/GJ and the shortest distance to the East Coast pipeline system is approximately 70 km. If the average price of the last six months were realized, the estimated capital for this project would be reimbursed within six months. We have already purchased the compressor – the item with the longest delivery time – which should be on site by the end of February/beginning of March. Our recent agreement with MES, announced on November 10, provided the CNG cartridges and we are currently optimizing the purchase of the dehydrator. Approvals are in progress.

Stages two and three of our vision depend on the successful completion of production trials at Rougemont. This morning, we announced that the pair of vertical wells Rougemont 3 and Rougemont 2 is finally on pump. We will lower the water level slowly: Bandana coals are very sensitive to pressure differentials and the changes should be slow. It will take 2-3 months before we start exposing the coals and the gas flow begins to build.

The results of the production tests at Rougemont 2/3 should be known by the end of this fiscal year. Depending on these results, we aim to launch the feasibility study of a permanent fiber spar pipeline to one of the two gas pipelines of the existing network, allowing to start the sale of up to 15 TJ/day as early as 2024. .

If further drilling warrants production above this capacity, the proposed pipeline easement could be used for steel line augmentation subject to required approvals.

As can be seen, State Gas is about to experience an exciting period of growth. Our board has been strengthened with the appointment of Philip St Baker and Jon Stretch, both of whom have deep experience extracting value from highly volatile energy markets. Last week, we announced the retirement of Ian Paton as a director of the Company, and we thank him for his service and contribution to your Board.

Richard Cote
Executive Chairman

About State Gas Limited:

State Gas Limited (ASX:GAS) is a Queensland-based developer of the Reid’s Dome gas field, originally discovered during drilling in 1955, located in the Bowen Basin in central Queensland. State Gas is 100% owner of Reid’s Dome Gas Project (PL-231), a CSG and conventional gas play, which is conveniently located 30 kilometers south-west of Rolleston, approximately 50 kilometers from the Queensland Gas Pipeline and the East Coast Interconnected Gas System. .

Permian coal measurements in the Reid Dome beds are extensive across the permit, but the area had not been explored for coal gas prior to State Gas ownership. In late 2018, State Gas drilled the region’s first coal gas well (Nyanda-4) in the Reid Dome beds and established the potential for a major coal gas project in PL 231. Extension of coal measures in the northern and central areas of the permit was confirmed in late 2019 by drilling by the Company of Aldinga East-1A (12 km north) and Serocold-1 (6 km north of Nyanda-4 ).

State Gas is also the 100% holder of Prospecting Authority 2062 (“Rolleston-West”), a 1,414 km2 permit (eight times larger than PL 231) which is contiguous to the Reid’s Dome Gas project. Rolleston-West contains very promising coal gas (CSG) and known conventional gas targets in the permit area. It is not limited by domestic gas reservation requirements.

The contiguous areas (Reid’s Dome and Rolleston-West), wholly owned by State Gas, allow for the integration of activities and a unified development of gas superfields, providing economies of scale, efficient operations and an option to marketing.

State Gas is implementing its strategic plan to bring gas to market from Reid’s Dome and Rolleston-West to meet short-term anticipated shortfalls in the East Coast domestic gas market. The strategy is to advance a phased evaluation program

State Gas Limited


Lucy Snelling
Head, Corporate and Commercial
E: [email protected]

Richard Cottee
Executive Chairman
E: [email protected]

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