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PEP38220: Ohai
PEP38220 (Ohai) is one of two coal seam gas permits held within the Western Southland region of the South Island and is the current focus of L&M Energy's appraisal activities.
Prior to the grant of the permit to L&M, 40 gas and >350 coal exploration wells were drilled within the permit.
The Company initially undertook a drilling programme to obtain a wide variety of base line data including coal quality, desorbed gas contents and fresh coal samples for adsorption and other CSG-related analyses. The results from this work showed that desorbed gas measurements indicated good gas contents within the sub-bituminous coals of the Ohai area. Comparison of the desorbed gas volumes with absorption isotherm results and filed observations indicate that the coal is saturated to slightly under-saturated.
A single-well multiphase testing programme was initiated within the permit in 2006. As part of this programme the production well OL-2 was drilled and completed for testing. The programme was successful. A further production well, OM-3 was drilled and completed in June 2009 so as to test the suitability of an open-hole completion method in the Morley coal measures and compare production results with earlier wells.
See: Map of PEP38220 from the New Zealand Petroleum & Minerals Website
See: PEP38220 Work Programme from the New Zealand Petroleum & Minerals Website
L&M Energy's Ohai Pilot Project
LME’s CSG Pilot Project is currently underway, with the first stage complete: the drilling of a 750m deep production well and (at this stage) a single 1035m long lateral development well.
Production testing is currently underway with the following goals: - Determining gas production profile
- Exploring Completions options
- Providing data for 2P reserves
- Defining the development template
CSG Commercialisation
The commercialisation opportunities are high with LME’s southland CSG permits being well placed to service existing facilities and end users.
New Zealand is home to some of the largest dairy plants in the world along with New Zealand’s largest single user of electricity, the aluminium smelter at the southernmost tip of the country, Bluff. In addition to these single point users there are multiple industrial sites that currently have high demand for polluting lignite or high price LPG, fuel oil or diesel. All of these fuels could be replaced by CSG
First mover presence in the South Island enables LME to take advantage of strong gas and electricity prices and the potential gas supply / demand imbalance.
Electricity Generation Options
In Q1 2011 LME entered into a landmark agreement to sell electricity output from the Pilot Project to the Rio Tinto Alcan-owned New Zealand Aluminium Smelters Limited (NZAS).
The pilot project is within metres of a local electricity transmission line and LME has finalised the regulatory consents required to site a Gough’s Power Systems-supplied 1MW Caterpillar gas-fired generator on the Ohai site. Once commissioned this generator will sell any electricity generated to NZAS.
The smelter, situated less than 80km away from Ohai, is New Zealand’s biggest single electricity user and expects to consume 5,500 GWh of electricity in 2011 along with significant volumes of Fuel Oil and Liquefied Petroleum Gas.
LME will continue to discuss future offtake options with NZAS as the CSG development progresses into the future.
LNG Generation Options
The Company entered into an agreement with New Zealand’s largest privately owned trucking company, H.W. Richardson Group (HWRG) to explore the feasibility of developing small scale Liquefied Natural Gas (mLNG) projects based upon the CSG from Ohai.
HWRG recognised the competitive advantage this green alternative to diesel can bring to their fuel distribution business, Allied Petroleum, through lower CO2 emissions, lower pricing and locally production at Ohai.
The results of the study initiated between LME & HWRG indicate that mLNG from Ohai has the potential to be priced substantially cheaper than LPG, diesel and fuel oil in a number of market segments in the South Island. Further, the local production and marketing base would lead to the price being sheltered from global price shocks, leading to more stable pricing for customers.
Further feasibility studies are planned to investigate the suitability of LNG for commercial and industrial customers further afield in the South Island.
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ASX NZX $0.075 / $0.08
Updated: 9 May, 2012
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