Coal Seam Gas in Australia

Page 2

The coal seam gas industry has evolved rapidly in Australia over the last few years

1998 – As it was

• Extremely high capital cost

• Inappropriate technology imported from USA experience

• Distressed gas price and poor market confidence

• Coal seam gas considered uncommercial to develop in some areas! Conoco, Rio Tinto withdraw

2002 - As it is

• Gas production has grown from <10 to >70 TJ/d in a 3-4 year timeframe

• Capital costs significantly lower with a ‘fit for purpose’ industry by developed

• High market confidence with many medium to long term gas contracts

• CSG will be supplying 25% of Queensland gas demand by mid 2002

Page 3

0

5

10

15

20

25

Bcf p

er y

ear

1995 1996 1997 1998 1999 2000 2001 2002

Queensland CSG Production

0

200

400

600

800

1000

1200

1400

Bcf

per

yea

1987 1989 1991 1993 1995 1997 1999

US COAL SEAM GAS PRODUCTION

Current exponential production growth in Queensland compares with US growth in the mid 80s

Page 4

OCA’s Coal Seam Gas Permits

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KILOMETRES

EASTERN QLDCSG Fields

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WalloonFairway

OCA CSG Permits

Talinga

Aberdeen

Peat

Scotia

Durham

Fairview

DawsonValley

Moura

HarcourtLilyvale

Roma

Gladstone

Page 5

Over the past 5 years in the Peat and Dawson Valley Projects OCA has spent $70M on commercialising these resources….

• OCA has adopted a staged but aggressive approach to exploration in the most prospective CSG areas in Queensland in order to maintain its leadership position in CSG….

• OCA has recently spent a further $49.2M on acquiring a strategic interest in the world class Fairview and Durham resource and increased its interest in the Walloon exploration play

Page 6

OCA’s present position

•OCA has interest in the following projects:– Moura (100%)– Peat (100%)– Fairview (7%)– Durham (64% - 98%)– NE Bowen (50%)– Walloon (50% - 100%)

•OCA is presently the largest CSG producer in Australia

– Presently producing 25 TJ/d or 60% of current CSG sales

Page 7

•Overcoming significant cost hurdles

•Developing appropriate technology

•Capturing short-term sales opportunities

•Gaining market confidence

•Managing land tenure issues

•PROVEN ABILITY TO COMMERCIALISE PROJECTS

OCA has gained its leadership position in CSG by overcoming significant challenges including:

Page 8

EASTERN QLD - CSG Fields Production Facility - Peat

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KILOMETRES

EASTERN QLDCSG Fields

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WalloonFairway

OCA CSG Permits

Talinga

Aberdeen

Peat

Scotia

Durham

Fairview

DawsonValley

Moura

HarcourtLilyvale

Roma

Gladstone

Page 9

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Page 10

For the Peat field an appropriate development strategy was adopted resulting in the following outcomes….

Development Strategy

• Develop appropriate technology

• Define size of resource

• Develop cost effective solutions

• Secure long-term market to underpin development

Outcomes

• Drilled Peat 9-33

• Proved deliverability of 17 TJ/d

• Achieved significant well cost reduction

• Proved sufficient reserves to underwrite long-term contract with BP

As a result of these achievements the Peat field is the first CSG development in Australia underwritten by a long-term gas contract

Page 11

EASTERN QLD – CSG Fields Workover Rig – Moura Field

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KILOMETRES

EASTERN QLDCSG Fields

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WalloonFairway

OCA CSG Permits

Talinga

Aberdeen

Peat

Scotia

Durham

Fairview

DawsonValley

Moura

HarcourtLilyvale

Roma

Gladstone

Page 12

Page 13

A similar approach was applied to the Dawson Valley (Moura area)

Development Strategy

• Focus on cost reductions

• Challenge imported technology

• Develop appropriate geological models

• Grow project exponentially

• Secure long-term contracts to underwrite ongoing development

Outcomes

• Cost reduction of >50%

• Increased peak flowrates by >100%

– Optimise local technology– More appropriate

geological models

• 2 medium-term contracts signed to underwrite ongoing development

Page 14

OCA Initiatives - Moura

• Introduced new stimulation technology

• Introduce mineral rigs

• Introduce mineral logging units

• Refine casing design

• Current costs are 45% of previous operator Conoco

Crucial to successful CSG is appropriate development costs (drilling, fraccing) and technology

Page 15

Moura Project – Reserves determination

Actual Production vs Simulated ProductionAverage actual rate (all rates zeroed to common start date) versus 80-acre simulated rate

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300

400

500

600

0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50

Time on Production, yrs

Avera

ge Ga

s Rate

, Mscf

d

Conoco "Sweet Spot" Wells

OCA 10 Well Program

OCA 8 Well Program

OCA 12 Well Program

Simulated 80-acre Well

• Single well simulation model based on history matching production data (including PLT’s), indicating recoverable reserve of 0.9 bcf per well and recovery factor of 54% of net contributing coal (80 acre spacing).

• OCA’s second approach is based on well decline analysis. This has determined an initial estimate of average ultimate reserves recovery of 0.87 bcf per well (80 acre spacing)

Page 16

OCA has adopted a staged but aggressive approach to exploration in the most prospective CSG areas in Queensland.

Page 17

ATP 333P

ATP 337P

ATP 337P

ATP 337P

ATP 526P

ATP 553P

ATP 564P

ATP 564P

ATP 564P

ATP 564P

ATP 564P

ATP 564P

ATP 564P

ATP 564P

ATP 584P

ATP 592P ATP 602P

ATP 653P

ATP 653PATP 675P

ATP 675P

ATP 675P

ATP 680P

ATP 680P

ATP 681P

ATP 681P

ATP 681P

ATP 684P

ATP 688P

ATP 690P

ATP 693P

ATP 693P

ATP 698PATP 699P

ATP 715P

ATP 715P

LR 01 .1.2

LR 01 .1.2

LR 01 .1.2

LR 01 .1.2

LR 01 .1.2

LR 01 .1.3

LR 01 .1.3

LR 01 .1.3

LR 01 .1.3

LR 01 .1.3

LR 01 .1.4

PL 41

PL 42

PL 54

PL 67

PL 94

PL 172

PL 173

PL 94

ATP 564P

Dawson ValleyProject

Baralaba

Blackwater

Duaringa

Emerald

Moura

Theodore

MungiProspect

HarcourtLead

LilyvaleProspect

Oak ParkProspect

LegendGas Pipeline

Powerline 275 kV

Powerline 132 kV

ATP 564P

PL 94

OCA ATP's

Coal ML's

Gas Field

CSM Prospects & Leads

JellinbahLead

DuaringaLead

DonLead

BaralabaLead

MinnieProspect

SiriusProspect

Page 18

ATP 564PACTIVITY

•OCA has drilled 5 wells in ATP 564P

•Processed 25,000 line km of aeromagnetic data identifying a number of opportunities for future drilling (2000 PJ unrisked potential)

•Potential reserves of 400 PJ identified in Harcourt, Mungi and Lilyvale

•Appraisal drilling and production testing of Mungi/Harcourt planned in 2002

Page 19

EASTERN QLD – OCA CSG Permits Coring Rig – Talinga FieldShowing Walloon Fairway

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KILOMETRES

EASTERN QLDOCA CSG PermitsShowing Walloon

Fairway

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WalloonFairway

OCA CSG Permits

QGC Permits

QldNSW

TalingaRoma

Surat

Page 20

Brisbane Telegraph circ 1950

Page 21

Walloon Coal Measures

•OCA contains significant acreage position along with Queensland Gas Company and Arrow Energy

•Around 30 wells drilled in past 18 months including a number of core holes. OCA drilled 4 core holes and 5 production holes.

•OCA has commenced the first pilot program at the Talinga field

•Significant ‘fairway’ identified with potential for up to 15,000 PJ

Page 22

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KILOMETRES

EASTERN QLDCSG Fields

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WalloonFairway

OCA CSG Permits

Talinga

Aberdeen

Peat

Scotia

Durham

Fairview

DawsonValley

Moura

HarcourtLilyvale

Roma

Gladstone

Page 23

• A significant fairway of high permeability proven with potential for 8500 PJ to 1000m depth limit

• Total of 50 wells drilled to date (41 Fairview, 9 Durham) producing around 20 MMcfd

• Aggressive drilling program planned on both fields during 2002

• The blue line represents the outline of the Palmer Fairway – the major producing trend in the San Juan Basin

OCA recently acquired in strategic stake in the world class Fairview and Durham fields

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Page 24

12/31/98 12/31/99 12/30/00 12/30/01 12/31/02

0

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20000G

as P

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ate,

Mcf

/d

0

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Wat

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Comet Ridge Coalbed Methane ProjectTotal Fairview Production