European Gas Limited Is Awarded Additional Acreage In Northern France Where It Has Ambitious Plans For CBM and CMM Gas Production
oilbarrel.com
European Gas Limited has transformed itself not once but twice over the past five years. In 2004 the company, then known as Kimberley Oil, was focused on the Canning Basin of Western Australia. This remote exploration project was not a successful venture for the ASX-listed firm and by 2006 the company had re-invented itself, trading under a new name to reflect its new focus on the coal bed methane (CBM) potential of Europe. The past year has seen another transformation, with the company moving from a speculative CBM play to a proven producer of gas.
This step from explorer to producer came at the end of 2007 when the company closed the A$43.7 million acquisition of Gazonor, a wholly-owned subsidiary of state-owned mining firm Charbonnages de France. This deal brought production and cash flows onto the books from the Nord-Pas de Calais coal mine methane (CMM) project, which comprises the Poissonnière and Désirée permits that together stretch for 579 sq km in northern France. Last week the company announced it had been awarded another 188 sq km permit, known as the Poissonnière Extension, thereby expanding its permit position at Gazonor by 33 per cent and it has an additional 1,352 sq km under application for exploration.
This is a substantial asset. CMM involves the degasification of old underground workings by drilling wells into the mine itself. The gas is then extracted under very low mine pressure, gathered and transported to central processing facilities for filtration, compression and onward sale. The Nord-Pas de Calais project is reckoned to have remaining proven reserves of 46 bcf that can be produced over the next 20 years. The drilling of additional boreholes could substantially increase the recoverable 1P reserves, with the project area carrying a 2P estimate of 131 bcf and additional 3P potential of 357 bcf.
The company is also exploring the potential of coal bed methane production. Unlike CMM, which extracts methane released as a result of mining activities, CBM involves drilling directly into unworked coal to release the adsorbed to the coal. This has the benefit that the extracted gas is often of very high quality, enabling it to be fed directly into the gas distribution network thereby reducing the filtration and processing costs associated with CMM. On the Nord-Pas de Calais project, only a small part of the coal basin has been exploited by mining and large quantities of coal remain, which contain potentially significant volumes of CBM. The initial estimate for the contingent CBM resources is put at 4.8 trillion cubic feet, making this a significant resource for the company and for France.
Now the company needs to monetize this resource. There is already modest production, which in the last business quarter was generating some €900,000 a month for the company, but plans are afoot to expand annual gas production from 300 Gigawatt hours to over 500 GWh, a level the site could sustain for at least ten years before moving to decline. In addition to refurbishing and expanding the gas production and processing capability, EGL is looking to redevelop the project to generate electricity (which would enjoy a premium tariff because the French government counts CMM as a renewable energy).
The acquisition of Gazonor has completely transformed the potential of the company. Production means cash flows, and cash is king in the current market. The company is also developing the credibility and contacts of a reliable and effective gas supplier in mainland Europe while the proven reserves give the company the ability to raise finance, which will be important as it seeks to expand Gazonor and develop its other key asset, the Lorraine permits in north east France.
Here the company has been busy drilling all-important pilot wells to prove up the commercial viability of a potentially vast gas resource, again running into the multiple trillion cubic feet (a 7 tcf resource has been mentioned in the past). EGL has successfully drilled horizontally through the coal seams and is now production testing the wells, the results of which will be used to draw up an effective development plan to drain the gas from these coals.
The company has other projects on its books, which are at an earlier stage of exploration, including Lons-le-Saunier, Gardanne and Saint Etienne permits. Here it is looking to joint venture with what it calls “substantial groups” to share the costs and risks of exploration. It also has a 50 per cent interest in a joint venture company that is looking to pick up acreage in the Benelux countries and at the end of last year applied for the 443 sq km Hainaut permit in Wallonia Coal Basin, which is the eastern extension of the Nord Pas de Calais Basin in France. |
