Highlights
• Third Coal Bed Methane well in South Wales (U.K.) at Pencoed-1 drilling ahead at 440m
• Encouraging results from first 2 wells
- Llangeinor 1 - 18 seams intersected for an aggregate drilled thickness of 19m, gas content up to 11.4m3/t
- Aberavon 1 - 12 seams intersected for an aggregate drilled thickness of 15.81m, gas content up to 9m3/t, permeability of 44mD in the shallower zone 18mD in the deeper zone
• Planning has commenced on exploration of Eden’s significant additional acreage
South Wales Coal Bed Methane Project (Eden earning 50%)
Third well drilling ahead: Pencoed 1 – Rockwool area
The current drilling, comprising three cored coal bed methane exploration wells, is designed to test key CBM parameters including the gas content and quality, and the permeability of the coal seams. This data is required to start to determine the economic potential of coal bed methane in the licence area.
This well is located on the eastern side of PEDL100, adjacent to a major consumer of gas in the Rockwool insulation plant. This area is considered very prospective for a development of a conventional CBM field – due to a large area of relatively flat open fields, good coal thicknesses at appropriate depths and proximity to a major gas customer.
Very good progress has been made with the hole with two shifts in operation. The hole is currently at 440m and drilling ahead. Target depth for the well is around 600m and to be completed by early August 2008. To date 8 seams have been intersected ranging in drilled thickness between 0.1m and 2.5m.
Second well completed: Llangeinor 1 – Cwmcedfyw area
The second well, Llangeinor 1, was drilled at Cwmcedfyw in South Wales, and completed in May 2008.
Llangeinor 1 results:
• Total depth of 810m with a total of 18 seams intersected ranging in drilled thickness between 0.1m and 3.3m for an aggregate drilled thickness of 19m.
• Gas content results up to 11.4 cubic metre per tonne (m3/t) with average dry ash-free gas content of 8.4m3/t (on seams from 534-670m).
• Due to hole instability and operational issues, no meaningful results were received from the permeability testing.
Aberavon 1 – Port Talbot area
The first well, Aberavon 1, was drilled at Port Talbot in South Wales, UK, 3km from the Tata steelworks, and completed in September 2007.
Aberavon 1 results:
• total depth of 429m with a total of 12 seams intersected ranging in drilled thickness between 0.25m and 2.35m for an aggregate drilled thickness of 15.81m.
• Gas content increasing steadily with depth from a low of about 1 m3/t at 100m to over 9m3/t at 400m.
• Encouraging permeability with the shallower zone (93m to 115m - 1.5m nett coal) being highly permeable at 44mD and the deeper zone (231m to 250m 1.86m nett coal) being moderately permeable at 18mD.
New Acreage
As previously advised, the recent award of 17 new licences from the 13th round of on-shore licensing conducted by the British government, which include 8 new blocks in South Wales, 5 in South West England and 4 in Kent delivers a fourfold increase to over 1,800 km2 in the area over which Eden and its JV partner hold petroleum and coal seam methane licences in the UK. Planning has commenced on exploration of this significant additional acreage.
In addition, a comprehensive digital data base of the coal seam data for the entire South Wales licence areas has been compiled by our UK farm-in partner from historical British Coal records which gives the project a great advantage for efficient and economic planning, testing and development of a coal seam gas field.
The National Balancing Point (NBP) gas price in the UK at 30 June 2008, was 60pence/therm, which is equivalent to US$12/mmbtu. At these prices, the net margins for a South Wales coal bed methane development are likely to be comparable with those obtainable by coal seam methane producers supplying proposed LNG projects in Australia given proximity to gas customers and without the requirement for the large capital expense required for liquefaction.
Conclusion
The encouraging exploration results, Eden’s significant acreage position, the current high UK gas prices and the size and proximity of the local market provides Eden with a very strong base for the potential development of a significant gas business over the next 1 to 2 years.
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