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oilbarrel comment and epg presentation

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    From http://www.oilbarrel.com/home.html hot off the press ...
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    "Like Afren, European Gas Limited has also seen big changes since its last appearance at an oilbarrel.com event some 12 months ago (although not, alas, in the share price). The ASX-listed company has not only consolidated its hold on its coal bed methane projects in France through the acquisition of its former partner Heritage Petroleum but it has also extended its asset base with the award of the Lons le Saunier permit and added production to the books through the €26.2 million acquisition of Gazonor, owner of the Nord Pas de Calais coal mine methane project.

    This is a project with immediate benefit (production is always nice to have on the books and last year the CMM generated revenues of €8 million), medium-term development opportunities (through operational efficiencies and new drilling), longer term upside (by exploring the coal bed methane possibilities) and even longer term gas storage and CO2 sequestration activities.

    For now, the company is looking to use the gas to supply electricity - the methane gets a premium “energie de recuperation” tariff of €80 per MW hour - to drill additional drainage holes and strip out inefficiencies. “This was a low priority asset for CdF [the former owner] and that’s the opportunity for us,” said MD Tony McClure. “They were in exit mode and little was done in terms of capital investment.” He expects to double revenues over the next 18 months just by “looking at the cost side and moving about 20 per cent of the production over to electricity generation, without doing much production enhancement work”.

    Longer term, the real interest here lies in the CBM potential. Some 2.5 billion tonnes of coal were extracted from this historical coal mining region, which is only about 10 per cent of the in situ coal, leaving plenty of CBM potential. “CBM is the principal target here,” said McClure. “This project’s CBM potential is up there with the size of our Lorraine project.


    Lorraine is the company’s most advanced CBM project, with plans to target about 1 tcf of gas in the first phase of development. Progress here has, as McClure acknowledged in response to a delegate’s question, been slow. “It’s been through a lot more science than we envisaged and we’ve spent a lot more money using North American labs and experts,” he explained. “Rig availability has also been a constraining factor. We’re okay for rigs for the next six months but it’s going to get very tight after that.” (The French government is apparently planning to use 20 rigs on a nuclear energy-related project: McClure noted there aren’t even 20 rigs in France.)

    Progress may have been slow but it has been promising. The results from initial test wells have been encouraging, encountering coal thicknesses and gas contents significantly higher than anticipated. The Folschviller-1 well, for example, encountered four major packets of 10 to 15 metres each, which may not rival the 25 to 40 metre coal packets in the prolific Powder River Basin in Wyoming but does eclipse the coals in Australia. A pilot production test in now underway using lateral completions to counter the low permeability coals and the company is expecting production of between 1 and 2 million cubic feet per day per well. The longer term potential here is significant: this could be a possible 200-well operation at which point Lorraine could be producing between five and ten per cent of France’s domestic gas needs."
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    The 31p oilbarrrel presentation can be viewed at http://www.ob-data.com/conference/feb08/europeangas.pdf

    Cheers
    Dex
 
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