• Significant progress inside the Mahalo Joint Venture has been made during and after the first quarter of 2021, regarding the structure of the Mahalo Joint Venture and Comet Ridge’s plans for significant progress in the Mahalo Hub Area.
• Comet Ridge expects to be able to further update the market on this progress over the coming weeks.
• Comet Ridge is positioning the multi-block Mahalo Gas Hub to provide meaningful gas volumes into the east coast gas market, where southern production is forecast to commence declining.
• Native title approvals completed successfully just after end of first quarter for Mahalo Far East block (to be ATP 2063).
• R&D tax incentive for FY20 expenditure of $1.961 million received in January 2021.
East Coast Gas Market
ACCC affirms looming southern gas supply cliff
EnergyQuest noted in its December 2020 report, that as the months go by, southern Australia edges closer to its gas production supply cliff. EnergyQuest stated “production from offshore Victoria, which supplies not only Victoria but also Tasmania and a substantial share of NSW and South Australian demand, is forecast to decline from around 2023. It might be later, like 2024, but it might also be earlier like 2022”.
The ACCC’s latest Gas Inquiry report, released on 16 February 2021, affirms EnergyQuest’s warning.
According to the Commission, east coast gas supply is expected to see a shortfall of as much as 30 PJ by 2024 in the southern states. The ACCC report lists six przjects approved for development and due to come online prior to the projected shortfall in supply. Of the six projects, the Gippsland Basin JV West Barracouta project operated by ExxonMobil is the largest and the only project located in the south. It is due to start production this year and is already included in EnergyQuest’s forecast of a shortfall. The other five projects are located in the Bowen and Surat basins and only supply relatively small volumes of gas.
The ACCC notes that production from the 2P reserves associated with these new projects has also already been factored into its long-term supply outlook when calculating the potential shortfall in supply from 2P reserves. Additional supply is likely to be required to avoid the projected shortfall in the southern states from either:
• an LNG import terminal located in the southern states; or
• domestic sources in the north (i.e., the Cooper Basin, Northern Territory or Queensland).
The ACCC notes correctly that if more supply is to come from the north, then further investment in northsouth transportation capacity is likely to be required. While options are being explored to expand this transportation capacity, there are currently no firm plans to do so.
EnergyQuest also notes in its March 2021 report that progress on east coast development projects is mixed, particularly in the southern states. It is possible that EnergyQuest’s production forecasts and those of ACCC are optimistic and the supply shortfall in the southern states occurs sooner than forecast.
Implications for Comet Ridge
Given the increasing need for further gas supply required into the East Coast Gas Market to replace declining southern production, Comet Ridge believes the Mahalo Gas Hub is well positioned to come on-line and deliver meaningful volumes of gas into that market, at a critical time. Comet Ridge believes the unit cost of Mahalo Gas Hub production from the shallow initial production fairway is very competitive with other new additional supply sources.
Mahalo Gas Hub Area, Bowen Basin, QLD
Comet Ridge holds equity in four blocks in the Mahalo Hub Area, with three of these currently held at 100% equity following recent successful Queensland Government bidding rounds. The total net area for Comet Ridge across the Mahalo Hub is substantial at 1250 km2 with a large part of these blocks siting over the highest productivity Mahalo shallow fairway that saw the Mira 6 well in the Mahalo Gas Project produce 1.4 MMcfd (million standard cubic feet of gas per day) from a horizontal pilot well drilled only 924 metres in coal. Development wells over the Mahalo Hub Area are planned to be drilled between 1,500 to 1,800 metres in coal, inferring development production rates, based on Comet Ridge geological modelling, of 2.3 MMcfd to 2.7 MMcfd per well in similar quality coal reservoirs.
Mahalo Gas Project (PL 1082 and 1083) – (Comet Ridge currently 40%)
The Mahalo Gas Project, with the two Petroleum Leases (PL’s) already awarded, is Comet Ridge’s flagship gas project and when in production, will provide the scale and infrastructure to underpin development of Comet Ridge’s 100% owned blocks in the Mahalo Gas Hub. The Mahalo Gas Project, focussed initially on the shallow fairway in PL 1082 and 1083 (see Figure 1), is currently a joint venture between Comet Ridge (40%), Santos (30%) and APLNG (30%).
During and after the first quarter of 2021, the Joint Venture parties have expended significant time and effort in assessing the best way to take the Mahalo Gas Project forward, in order to meet the timing and value expectations of each of the parties in the JV. Comet Ridge also needs to consider how to best maximise value from the three 100% blocks (total 885 km2) that lie immediately north of the Mahalo Gas Project, that can benefit from a combined development concept to drive down unit costs and increase the total gas offtake from the combined Mahalo Hub Area.
Significant progress inside the Joint Venture has been made over the first quarter, around the structure of the Mahalo Joint Venture and plans for progress in the Mahalo Hub Area. Comet Ridge expects to be able to further update the market (in some detail) on this progress over the coming weeks.
Mahalo North (ATP 2048) – (Comet Ridge 100%)
During the quarter, Comet Ridge continued detailed geological modelling work for the Mahalo North project (ATP 2048) which lies over the highest productivity Mahalo shallow fairway to the northwest of the Mahalo Gas Project. This work continues to enhance Comet Ridge’s view of the high quality of the 100% block.
Analysis of development options indicates that maximum value for Comet Ridge is achieved via connection to the main Mahalo Gas Project and expanding the throughput of the Mahalo Gas plant and pipeline to accommodate the numerous production well locations available in Mahalo North (ATP 2048).
Galilee Basin, Qld - ATP 743, 744 & 1015
(Comet Ridge 100% in “Shallows”, 70% in “Deeps”)
Potential Commercial Area applications
Activities in the Galilee Basin projects in the current quarter have focused on technical work that will underpin securing the large prospective CSG and conventional resource areas with Potential Commercial Area (PCA) tenure applications to the Queensland Government.
Updating and quantifying very large CSG resource potential
Detailed geological and geophysical work continues to progress to refine the geological model for the Gunn CSG Project Area across ATP 744 and ATP 1015. This area is in excess of 2100 km2 in total with an initial CSG focus area of approximately 950 km2.
This upgraded model will be used to identify development options using geological characteristics and concept well designs. The geological model will also underpin a revised CSG resource assessment for the Gunn CSG Project area.
During the quarter, amendments to work programmes were submited to and then approved by the Queensland Department of Resources for each of ATP 743, ATP 744 & ATP 1015. This is a first step in the process of securing Potential Commercial Areas (PCAs) for the Galilee Basin.
As at 31 March 2021, Comet Ridge had $4.241m cash on hand (unaudited).
Payments to Related Parties
The aggregate value of payments to related parties and their associates of $241k for the March quarter (shown in item 6.1 of the atached Quarterly Cashflow Report) relates to the salary of the Managing Director and fees paid to Directors (including PAYG and superannuation payments made on their behalf).
Shares and Performance Rights Position
The total number of shares on issue at 31 March 2021 is 791,211,719.
The Company also has 11,580,000 performance rights on issue at 31 March 2021.