Gas Commercialisation

Drillsearch Energy joined with Cool Energy and its major shareholder and partner in PEL 106, Beach Petroleum, last year to conduct a feasibility study for the construction and operation of a gas processing facility using the Cool Energy CryoCell® cryogenic gas processing technology. Drillsearch had focused on Cool’s technology as it presented, among other things, a very effective way of dealing with high CO₂ which is an issue for the gas in PEL 106. In addition the technology would enable a very effective means for CO₂ geosequestration and hence the potential green benefits of carbon capture.

The feasibility study looked at the construction of a 20 million standard cubic feet per day (20 mmscfd) capacity plant which would strip out the CO₂ and other impurities and produce LPG, condensate and sales quality natural gas to sell into the relevant markets. While the Study showed that the plant would probably be commercially viable it did not give the parties sufficient comfort to proceed with the project in that form. Essentially the project needed greater reserves of gas behind it to make a plant of that size feasible. The 3 parties therefore decided not to proceed to Front End Engineering and Design (“FEED”) for such a plant.

Drillsearch took those results away and considered it further.  It essentially came down to a matter of size. On considering the market needs, the revenue drivers and the likely growth of demand for such a facility, Drillsearch decided to proceed with a FEED for a different sized facility, still using the Cool Energy CryoCell® technology. As announced on 21 December 2007 the Company has entered into a services agreement with Cool Energy to conduct a FEED on a 60 mmscfd capacity plant with in-built flexibility to deal with changing gas specification and variations in throughput. Such an approach will provide greater flexibility to service the peaking demands for gas in South Australia and New South Wales as well as the ability to extract the valuable LPG’s and condensates on a more rapid basis. It has the added advantage of being built to handle growth, both out of its own and future fields as well as other smaller producers in the region.

That FEED has moved through Phase 1 with detailed drawings and costings developed. The results so far are encouraging and Drillsearch is moving towards completing the FEED and developing a financial decision case. Visits have been conducted to the likely site for the facility near the Middleton field and many of the fundamental structural issues have been identified and addressed. A positive result will provide the confidence for Drillsearch to address new prospects for gas in its permits aggressively and should also encourage other Permit holders to do the same – the greater the supply of gas available for the facility, the more feasible it becomes. Further exploratory drilling in PEL 106 is due to be conducted by Beach Petroleum for Drillsearch from October 2008, subject to the timing of the drilling rig contracted becoming available.

This is an exciting project which has the potential of providing a green solution for the production of gas by junior exploration and production companies in the Cooper Basin.