GGZ Block Exploration Progression

RNS Number : 0468G

G3 Exploration Limited

27 February 2018

 

27 February 2018

G3 EXPLORATION LTD.

("G3 Exploration", "G3E" or the "Company") 

GGZ Block Exploration Progression

G3 Exploration Ltd. (LSE: G3E), an independent specialist in the exploration and development of coal bed methane gas (CBM), with roots in China and a focus on international expansion, is pleased to provide a progress update of the exploration and development activities for its Baotian-Qingshan ("GGZ")² Block, situated in the Guizhou Province, China.

GGZ Block highlights as of year-end 2017

·    Successfully drilled 45 CBM production wells (23 vertical, 19 directional and 3 LiFaBriC), de-risking 30 Bcf of gas with a P10 NPV of over US$300 million

·    15 wells were put on production and 7 wells have shown initial commercial gas rates. Daily well performance is being monitored by the Company to assess long term production ranges

·     A total of 219,827 feet (67 km) of 2D seismic was acquired during the period

·    Obtained selected slim-hole data for 585 wells previously drilled by the Coal Bureaus, with the availability of significant coal seam and surface data

·    A highly reliable and credible geological subsurface model has now been created to determine future development plans and subsurface optimisation over the 107km²  block

·    In addition to the current 7 online production wells, the 45 drilled wells in 2017 will be stimulated and put online in H2 2018 to commence initial gas sales from the GGZ Block

· Chinese Proved Reserves Report (CRR) submitted ahead of approval of the Overall Development Plan (ODP), which is anticipated to be compiled in H2 2018

·   The anticipated commerciality of the GGZ Block will create additional shareholder value, as the block follows GCZ and GSS from development into production

Mr. Randeep S. Grewal, Chairman and CEO of GE Exploration, commented:

"The GGZ Block has progressed from exploration into development and is an exciting proposition as it contains multiple prospective coal seams. The block is located in Southern China, which has historically been short of gas production.

"We see the GGZ Block offering considerable additional value to our shareholders. As a result, we will be progressing with the CRR and ODP during the course of the year. Realising the potential of the GGZ Block is a priority objective for the Company in the medium term and one that I believe will achieve our dual aims of actively participating in the gas and clean energy revolution in China, while providing strong returns to shareholders. GGZ will be our third commercial block, following our successes in GCZ and GSS."

Block overview

G3E is the operator with a 60% interest in the GGZ Block that covers a total PSC area of 947 km2 in Guizhou Province. PetroChina is the working interest partner with the remaining 40% interest. The block is located within the Liupanshui coal field with coal bearing strata present in the Upper Permian Longtan Formation. There are a total of 30 coal seams present in the block, of which seven are currently considered prospective for development. Total net coal thickness for the prospective seams in the areas tested is approximately 66ft (20.1m) with three of the seams (17, 19 and 29) showing coal thickness in excess of 16ft (5m) each. The average gas content across the seams is approximately 529 Scf/tone (15m³/tone). The total gas-in-place is estimated to be 6.04 Tcf (171.1 Bcm)¹. The Company has 30 Bcf of 2P reserves and 106 Bcf of 3P reserves as of year-end 2016.

Independent estimates of gas initially in place, reserves and resources by Netherland Sewell & Associates (NSAI) for major coal seams in the GGZ Block are tabled below as of year-end 2016:

Table 1: Initial gas in place:

GGZ Block major coal seams	GIIP (Bcf)
Seam 3	310.5
Seam 5	129.4
Seam 12	377.8
Seam 17	2,195.0
Seam 19	1,826.9
Seam 26	376.4
Seam 29	823.6
Total	6,039.7

Table 2: Reserves and resources estimates:

	Net reserve/resource volumes (Bcf)	Present worth at 10% ($million)
Proved + Probable (2P)	30	373
Proved + Probable + Possible (3P)	106	1,306
Best Contingent (2C)	871	9,309
Prospective (Best Est.)	599	5,102

2017 GGZ accomplishments

During 2017, G3E concluded advanced exploration in Guizhou by successfully drilling and completing 12 CBM production wells. These production wells were drilled in three major coal seams; namely coal seam no. 17, 19 and 29. A total of 33,151 ft (10,104m) was successfully drilled in these 12 wells. The wells were drilled by Greka Drilling Ltd (GDL: GDL), with the fastest drilling record of 431m per day.

As of year-end 2017, the exploration programme has successfully drilled 45 CBM production wells (23 vertical, 19 directional and 3 LiFaBriC) in GGZ, 15 wells were put on production and 7 wells have shown initial commercial gas rates. Initial gas rates and well daily performance is being monitored by Company's highly experienced CBM production engineers.

G3E has acquired a total of 219,827 feet (67km) of 2D seismic, drilled and logged 45 CBM production wells, covering all seven of the prospective seams and obtained selected slim-hole data for 585 wells previously drilled by the Coal Bureaus. With the availability of significant coal seam and surface data, a highly reliable and credible geological subsurface model to determine future development plans and subsurface optimisation is complete over 107km².

Outlook

The Company successfully submitted CRR to its partner, PetroChina. The CRR is expected to be submitted to Ministry of Land Resources (MLR) in H1 2018. CRR is a precursor to approval of the ODP, which is anticipated to be compiled in H2 2018.

In addition to the current 7 online production wells, the drilled wells in 2017 will be stimulated and put online in H2 2018 to commence initial gas sales from the GGZ Block.

Market opportunity

The GGZ asset is proximate to both the China Myanmar Oil & Gas pipeline and the Guizhou Natural Gas pipeline, both of which could be used as a means to transport gas from the GGZ Block to end users.

Guizhou Province is in southern China and currently sources the majority of its gas needs by pipelines from other provinces. The development of gas resources within Guizhou itself is expected to realise enhanced margin as the city-gate pricing, which acts as a barometer for market price, includes a transportation premium to encourage delivery to Guizhou. Gas sourced and produced in Guizhou should benefit from this premium.

The August 2016 City-Gate prices (for provincial capital cities) published by the NDRC in respect of both industrial and residential gas are among the top ten highest city-gate prices in China at US$17.43/Mcf (4.0RMB/m³) and US$13.95/Mcf (3.2RMB/m³) respectively (based on an exchange rate of US$1 - 6.5RMB).

-Ends-

For further information on the Company and its activities, please refer to the website at http://www.g3-ex.com/or contact:

FTI Consulting

Edward Westropp / Kim Camilleri / Elizabeth Burnham / Toby Chidavaenzi

Tel: [phone]

About G3 Exploration Ltd.

An independent specialist in the exploration and development of coal bed methane gas (CBM); G3 Exploration has accumulated a unique wealth of experience through its significant 25 year track record of technology-led exploration and drilling success in CBM, across different geographies.

G3 Exploration's intention is to leverage its expertise, monetise its current 7112km² acreage position in mainland China and widen its asset portfolio into other prospective geographies across  Africa, Europe and Asia, utilising its proprietary knowledge and experience in exploiting CBM resources. Furthermore, G3 Exploration has interests in Green Dragon Gas, which comprises of two producing assets with an acreage of 455km² in Shanxi province, China

G3 Exploration is listed on the main market of the London Stock Exchange (LSE: G3E).

 

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