Energy security continues to be a major consideration as best highlighted by recent gas price gains due to escalation of the military conflict between Russia and Ukraine along with lower than expected Norwegian production.

Natural gas prices in Asia recently rose to a three-month high, tracking European gas gains as high temperatures in north-east Asia increased cooling demand.

While the Dutch TTF gas price – considered to be the benchmark for continental Europe – moderated somewhat this week after climbing through most of June, further gains are expected on the back of increased gas consumption to fuel greater usage of air conditioning systems as temperatures continue rising.

Chinese natural gas demand is also expected to increase, which will do no favours for European gas consumers.

The developments clearly highlight just how important gas remains in the current and future energy mix, so it is no exaggeration to say that companies such as Conrad Asia Energy (ASX:CRD) that have significant existing (and growing) gas resources are well positioned to benefit.

So just what does Conrad bring to the table?

Starting gas resource

The company’s cornerstone asset is the Mako gas field within the 76.5% owned Duyung production sharing contract (PSC) in Indonesia’s West Natuna Sea.

Besides a sizeable resource of 413 billion cubic feet (Bcf) of gas, the field benefits from easy access to existing infrastructure that is already connected and sending gas to Singapore and Malaysia.

Development costs are expected to be fairly low at US$275m and it is expected to be capable of generating gas sales of about US$4.5bn, or US$2.4bn net to the company after Indonesia government fiscal take. Importantly, Mako represents a secure and strategic energy resource for Singapore that is less expensive with reduced carbon emissions than LNG.

Conrad already has an approved plan of development and work is currently underway to conclude a gas sales contract with a Singapore gas buyer and Indonesian regulator SKK Migas, which could allow for first gas sales in 2025 transitioning Conrad Asia into a significant cash flow generator.

Aceh gas assets

At Indonesia’s Aceh Province, the company recently upgraded best estimate (2C) Contingent Resources at its two offshore PSCs up by 75% to 214Bcf of gas – 161Bcf of which is attributed to Conrad.

These resources are hosted within three of the four discovered gas accumulations in the Offshore North West Aceh (Meulaboh) and Offshore South West Aceh (Singkil) PSC and were upgraded following a Competent Persons Report evaluating the flow tested discoveries in the PSCs.

A fourth gas accumulation – Keudapasi – has very little seismic data and has not been included in the Contingent Resource at this stage.

All the discoveries, which were made in the 1970s, were successfully flow tested at potentially commercial rates of almost pure methane – with very low levels of nitrogen and carbon dioxide – but were not previously developed due to low gas prices at that time. 

The Meulaboh and Singkil PSCs cover 9,182km2 and 10,700km2 respectively and despite the existing discoveries are classified as “frontier areas”, granting Conrad with attractive fiscal terms which are amongst the most favourable in Indonesia.

Meulaboh contains the Meulaboh-1 and Meulaboh East-1 gas discovery wells which intersected gas columns of 90ft and 30ft while flowing gas at maximum rates of 6.7 million standard cubic feet of gas per day (MMscfd) and 7.99MMscfd respectively.

It also includes the Keudepasi-1 well which intersected a 60ft gas column and flowed gas at a maximum rate of 5.34MMscfd.

Singkil contains the Singkil-1 gas accumulation that intersected a 270ft gas column and flowed gas at a maximum rate of 10.06MMscfd. 

While these are certainly attractive, the two PSCs also host several large structures in the deep water areas with identified gas chimneys and flat spots on seismic data – an indicator of potential hydrocarbons – that could host multi-trillion cubic feet of gas potential.

The combination of existing discoveries and significant exploratory potential that has already yielded high exploration success rates, strongly positions Conrad with an important energy resource in the fourth most populous country in the world that is currently experiencing strong economic growth.

Further gas potential

While Mako and two Aceh PSCs already have significant existing gas resources, the company also holds the 1,640km2 offshore Mangkalihat PSC in the Tarakan Basin, northeast Kalimantan.

A number of leads and prospects that are on trend with known oil and gas accumulations have already been identified.

These cover a range of exploration play types that offer Conrad varying levels of risk/reward profiles.

 

 

 

This article was developed in collaboration with Conrad Asia Energy, a Stockhead advertiser at the time of publishing.

 

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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