Elixir Energy (ASX:EXR) claims ‘unlocking’ gas resources in the Taroom Trough could help to alleviate the ongoing energy crisis in Australia’s east coast.
Managing director Neil Young told an audience at RIU’s Essential Energy conference on Wednesday that depletion in the Bass Strait – in conjunction with increasing demand – meant that news solutions needed to be found for gas supply.
“Our assets are on the east coast, and I’m sure that even in Perth you’ve heard that the gas crunch there is now upon us,” he said.
“Government intervention has actually put a floor on gas prices of about 12 dollars, and LNG imports are inevitable, and governments will need to provide more support to avoid the consequences of cold showers and power outages.”
One such solution was greater investment in south Queensland’s Taroom Trough, where a number of energy operators – such as Shell, Santos and Omega – have situated themselves, and where Elixir is currently looking for coal-bed methane (CBM) gas.
Aside from being a significant part of the larger Bowen Basin, the trough is also promising because of its infrastructure, Mr Young said.
“Pipelines take gas from Queensland to the southern states, and the LNG plants in Gladstone have growing haulage,” he said.
“There’s also a lot of local gas usage for power stations in the region. There’s gas storage in the region, which is expected to grow.
“It’s also advantaged in terms of this area of oil and gas being present for a hundred years, the communities understand it.”
Elixir’s flagship Grandis Gas Project has seen a number of breakthrough developments this year from its Daydream 2 appraisal well, Mr Young added.
“The Taroom Trough hosts – and we think we’ve proved it – a Basin-Centred Gas play: that’s an unconventional play that does not need conventional structures,” he said.
“It can accordingly be pervasive and can host an enormous amount of extractable gas.
“A number of fronts on which we’ve made breakthroughs are validating a mechanical earth model…it’s the cornerstone of us achieving the R and D (research and development) tax credit, whereby the Federal government is generously paying for half the cost of our well.”
News-flow from Daydream 2 had bolstered expectations for the region, Mr Young said.
“We took cuttings from coals at 3700 metres and deeper – that’s never been done before,” he said.
“We proved that the gas content in those coals was vastly higher than what we or anybody else had thought.
“We also encountered a free-flowing reservoir that flowed without stimulation – again, never achieved before in the Taroom Trough, and up to 4200 metres in depth, which normally the overburdened pressure would prevent free flow at those depths.”
He added that Elixir was close to declaring commerciality for the project, with Economic Modelling showing a breakeven flowrate of approximately 2.5 MMCFPD (million cubic feet per day).
Elixir has been trading at 14.5 cents.
See Neil Young’s interview with HotCopper’s Sonia Madigan at the conference.