Update on Shale Resource and

RNS Number : 5917U

Igas Energy PLC

19 October 2010

 



19 October 2010

IGAS ENERGY PLC
("IGas", "the Company" or "the Group")

Increased Production at Doe Green and Update on Shale Resource

Doe Green Gas Production- up by 40%

IGas Energy plc, a domestic gas producer and a leading developer of unconventional gas resources in the UK, is delighted to announce that it has increased average gas production at its Doe Green site near Warrington in Cheshire by around 40% per cent.

This increase has been achieved following the implementation of a range of measures designed to optimise the de-watering process at the site's DG2 well.  The contributing laterals (understood to be over 1,000 feet in length) have now been producing at the increased rate of around 60,000 standard cubic feet (scf) per day of high quality CBM for over six weeks.

IGas has been steadily producing gas and generating electricity for over a year from Doe Green and remains on track to establish the UK's first CBM full production site in 2011.  The Company could potentially increase its operations at Doe Green, and as a consequence has applied for planning permission for two more wells on the site.

IGas is the largest independent CBM producer in the UK.   Based on the Contingent resource estimates prepared by D&M, the Company's independent reserve assessors, the Company has enough gas to supply electricity to over 7 per cent of the UK's household's for 15 years.

Shale Resource- up to 1.95 Tcf unrisked Gas Initially In Place (GIIP)

On behalf of IGas, Equipoise Solutions Ltd, has undertaken an independent review of the shale gas potential of the Holywell shale within certain interests held by IGas, across the North West of England and North Wales.  These interests comprise UK Onshore Licences PEDL 116, 145, 184, 190 and 193, and UK Offshore Blocks 110/18 (part), 110/19 (part) and 110/23.

The Holywell shale is documented as having organic rich bands of sediment with relatively high total organic carbon, and it, or its lateral equivalents, form the source rock for hydrocarbons offshore in the East Irish Sea, and many of the onshore UK oil and gas fields.

Due to the very limited data available for the Holywell shale, and indeed analogue producing shale fields in Europe, extensive use of publically available data from normally pressured US shale analogues were used in deriving the volumetric estimates.

Estimates of area in which the Holywell shale may be in the gas window were used to determine Low, Mid and High estimates of GIIP aggregated over the IGas interests listed above. These results are tabulated below.

		Gross			Net		Risk	Operator
	Low	Mid	High	Low	Mid	High	Factor
TOTAL GIIP (Bcf)	89	1,139	4,644	31	412	1,945	50%	IGas/ Nexen

Table 1: Low, Mid and High estimates of Area and GIIP, IGas' licences (gross and net IGas)

Given the limited data points available, assumptions have to be made as to the development of the shales across the licence areas. The risk that the development is not as assumed in the above table is estimated by Equipoise Solutions Ltd to be 50/50.

The above values assume the Holywell shale is normally pressured. While the Company has no evidence of this to date, there is a possibility that parts of the Holywell shale is actually overpressured. The consequence of this would be higher gas content and higher initial production rates in those areas.  Management estimates that if the Holywell shale was subsequently found to be overpressured then the corresponding gross estimate for the GIIP could be greater than 10 Tcf depending on the extent of the overpressured area and other factors.

IGas intends to conduct a focussed programme of activity which will enable the Company to understand better the shale potential that is contained within IGas' acreage and complementary to its primary objective of commercial CBM delivery.  The shale related activity will include:

·      Data acquisition (core/log data etc )

·      Core analysis (geochemistry/geomechanical)

·      Sponsorship of an M.Sc at a major UK University to further study the Holywell shale

Further development of the shale potential in IGas's acreage will depend on the outcome of these studies and experience elsewhere within the UK and Europe.

Andrew Austin, IGas CEO said:

"The materially improved production rates are a significant step in demonstrating the commerciality of the gas held in our acreage and the Board is very encouraged by the results.

 Whilst IGas' principal objective remains delivery of commercial CBM production, the additional potential of shale gas is very exciting; as this sector has seen significant growth in North America and increased interest across continental Europe."

Ends

For further information please contact:

IGas Energy Plc	Tel: [phone]
Andrew  Austin, Chief Executive Officer
RBS Hoare Govett	Tel: [phone]
Stephen Bowler/ John MacGowan
Kreab Gavin Anderson	Tel: [phone]
Ken Cronin/ Kate Hill/ Anthony Hughes

Notes to Editors:

IGas Energy plc ("IGas")

IGas was set up to produce and market domestic sourced gas, primarily from unconventional reservoirs, particularly coal bed methane. IGas is now producing gas from its pilot production site at Doe Green in Warrington and selling electricity through its on-site generation, a UK first from CBM. Initial production rates indicate that the Company should exceed its threshold for commerciality.

IGas has ownership interests of between 20 and 100 per cent in eleven PEDLs in the UK, wholly owns two methane drainage licences and has a 75 per cent interest in three offshore blocks under one Seaward Petroleum Production Licence. These licenses cover a gross area of approximately 1,756 km2. The mid case GIIP is 3,823 Bcf (source: Equipoise Solutions Ltd), excluding any shale potential.

The coal seam both generates and traps the gas, which can be extracted by drilling into the seam and collected for use as fuel. CBM is exactly the same as other forms of natural gas, and is used to provide both industrial and domestic power and has the potential to be an important new source of energy for the UK.

Equipoise  Solutions Ltd

Equipoise Solutions is a privately owned independent consulting company established in 1998 with offices in South London. The company specialises in petroleum geology and geophysics. The work has been supervised by Dr Adam Law, Director of Equipoise, a post graduate in Geology and a Fellow of the Geological Society of London. He has 15 years experience in the evaluation of oil and gas fields and acreage. Mr Donald Alastair Scott has reviewed and approved these estimates. Mr Scott is a Director of Equipoise, and has over 40 years experience in the evaluation of oil and gas acreage.

For further information on Equipoise Solutions, please visit:

www.equipoisesolutions.ltd.uk 

Qualified Person

John Blaymires, Chief Operating Officer of IGas Energy Plc, and a qualified person as defined in the Guidance Note for Mining, Oil and Gas Companies, March 2006, of the London Stock Exchange, has reviewed and approved the technical information contained in this announcement.  Mr Blaymires has more than 27 years experience.

Glossary

The following definitions apply throughout this announcement, unless the context requires otherwise:

Bcf	billions of standard cubic feet of gas
boe	barrel of oil equivalent
CBM	coal bed methane
CPR	Competent person report
DECC	The Department for Energy and Climate Change
FDP	field development programme
GIIP	gas initially in place
PEDL	Petroleum Exploration and Development Licence
Tcf	trillions of standard cubic feet of gas

 

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