Range Resources (ASX: RRS) and its partners have reached an agreement with Georgian Industrial Group to jointly develop the coal seam gas and conventional gas potential around the Tkibuli‐Shaori Coal Field.
The fast track assessment and development program is designed to bring the Tkibuli project, which has gross estimated Contingent Resources of about 400 billion cubic feet of CSG, into gas production and sales within 18 months.
GIG, the largest industrial holding company in Georgia, will purchase all gas produced on a take or pay arrangement at a 5% discount to a regional indexed price less transportation, removing the monetisation risk. Regional prices have averaged between US$8 and US$10 per 1000 cubic feet of gas.
“This is a major opportunity for the company and the significance of the project should not be understated,” Range executive director Peter Landau said.
He added the ability to finance the project through debt underpinned the deal by removing any immediate financial commitments to Range.
“We believe the deal has huge potential for the company in the next three to five years as the production base grows and will generate significant revenues for the company.
“The joint venture compliments Range’s current focus on production growth, whilst ensuring its operational and financial capabilities remain with Trinidad.”
The joint venture will start feasibility and technical studies before carrying out a three to four well pilot project.
This pilot program will focus on appraising targets already venting methane and is expected to start in the second half of 2013.
New wells will target horizons at depths between 500 and 2,000 metres and can be drilled within 45 days. The consortium will ensure that the first well of the program counts as the commitment well for Block Vlb.
Range and its consortium partners will form a development company on a 50:50 basis.
Tkibuli
Tkibuli has been assessed by Advanced Resources International to host about 400Bcf of CSG.
Sand horizons have also been identified around the coal beds, which could add additional conventional hydrocarbon resources.
Over 400 exploration and non‐hydrocarbon wells have been drilled in the Tkibuli area, many encountering hydrocarbons and one producing gas for over 35 years.
The appraisal and pilot wells will clarify flow rates and other key parameters including optimum well construction and completion strategy; well spacing; and water treatment prior to full scale development.
Based on previous studies, Range expects to execute 6 CSG wells per annum, each capable of producing between 300,000 and 500,000 cubic feet of gas per day.
Range has a 40% interest in blocks Vla and Vlb that cover a total of 7,000 square kilometres.
Georgian Industrial Group
GIG is the largest holding company within Georgia and embraces a number of subsidiary companies operating in the energy sector, acquiring and processing of natural resources, production of building materials, logistics services and real estate development.
Its operations are focused on the acquiring and processing of the country’s resources, which in turn fosters long-term development and success of Georgian industries.
Analysis
While Trinidad remains the focus for Range Resources, the deal with Georgian Industrial Group brings a heavyweight presence to support development of Tkibuli coal seam gas and conventional gas potential.
It also removes the need to secure a buyer for any gas produced as it has already agreed to offtake any gas produced.
The regional pricing of between US$8 and US10 per thousand cubic feet is also attractive as it compares favourably to prices in Australia, which averages between from A$4 to A$6 per thousand cubic feet in the Eastern States.
Taken together, this has the potential to be a strong second arrow in Range’s quiver of projects.
http://www.proactiveinvestors.com.au/companies/news/39744/range-resources-strikes-georgian-coal-seam-gas-development-deal-39744.html?
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