State Gas Powers Up HDNG Trials and Resolves Access Dispute Ahead of 2025 Expansion

Trial Success and Environmental Promise

State Gas Limited (ASX: GAS) has reported encouraging progress in its quarterly activities, notably advancing its pioneering High Density Natural Gas (HDNG) technology. The company’s HDNG production plant has successfully supported a trial demonstrating that large mine trucks can operate efficiently on dual fuel engines, substituting diesel with natural gas and achieving a significantly reduced CO2 emission profile. This trial, conducted at a local coal mine, marks a critical step in validating HDNG as a commercially viable and environmentally superior fuel alternative.

Plant performance improved steadily throughout the quarter, reflecting refined operational practices and more stable gas production from the Rougemont 2/3 well system. Despite a temporary production halt caused by an access dispute, State Gas is optimistic about resuming and expanding HDNG supply in the first quarter of 2025, aiming to increase the trial to six trucks. This expansion will require the mining services customer to upgrade onsite fueling infrastructure, a collaboration currently underway.

Resolving Access Challenges and Exploration Outlook

The quarter was also marked by the resolution of a significant access dispute with the landowner at the Rolleston West Project, which had temporarily impeded exploration drilling and HDNG production. The settlement reached in November 2024 allowed site access to resume, though the company prudently deferred its planned two-well drilling program to early 2025 to avoid the wet season and ensure optimal conditions.

Funded by a $5.5 million Queensland Government grant under the Frontier Gas Exploration Program, the upcoming drilling campaign is pivotal for State Gas. Successful results from these wells are expected to underpin the accreditation of a maiden 2P reserve estimated between 30 and 50 petajoules, a critical milestone for demonstrating the commercial viability of the Rolleston West Project and supporting future petroleum lease applications.

Financial Position and Strategic Focus

Financially, the company faced unanticipated costs due to the access dispute but is actively pursuing mitigation strategies, including negotiations with the landowner and insurance claims. State Gas anticipates a significant cash inflow in late February 2025 from ongoing grant funding related to its R&D activities on the HDNG plant, complementing the exploration grant and supporting medium-term operations.

Management emphasizes the importance of ramping up HDNG sales to generate organic revenue streams, which would reduce reliance on equity capital. The company has also reviewed its overhead costs, maintaining a lean structure aligned with its strategic objectives. With its assets strategically located near existing pipeline infrastructure and other successful gas projects, State Gas is well-positioned to meet growing energy demand on Australia’s East Coast.

Looking Ahead

State Gas remains cautiously optimistic about the year ahead. The successful expansion of HDNG trials and the forthcoming drilling program are key catalysts that could unlock substantial value. The company’s innovative virtual pipeline technology and modular CNG facility offer flexible solutions to deliver pipeline-quality gas to remote end users, potentially accelerating the transition from diesel to cleaner fuels in mining and other industries.

However, the company acknowledges ongoing risks, including operational disruptions and financial uncertainties, which it continues to address. The coming months will be critical in translating technological promise and exploration potential into tangible commercial outcomes.