Rolleston West Wells Intersect 8m Coal; HDNG Supply Trial Expands to Six Trucks
State Gas Limited advances its Rolleston West Project with successful drilling of two vertical wells confirming coal and gas continuity, aiming to establish a maiden 2P reserve. Concurrently, the company expands its high density natural gas supply, targeting significant revenue growth through a six-truck dual fuel trial.
- Successful drilling and logging of Rougemont 5 and 6 wells with ~8m net coal intersected
- Completion and production testing of wells expected by mid-2025 to support maiden 2P reserve
- Expansion of HDNG supply trial from two to six mine trucks, increasing potential revenue
- Improved liquidity from R&D grants and ongoing management of loan facilities
- Strategic focus on pipeline access and commercialisation of HDNG technology
Drilling Success at Rolleston West
State Gas Limited (ASX: GAS) has reported encouraging progress in its Rolleston West Project, located in Queensland’s Southern Bowen Basin. The company successfully drilled, wireline logged, and cased two new vertical wells, Rougemont 5 and 6, intersecting approximately 8 metres of net coal within the Bandanna Formation at depths between 419 and 520 metres. Elevated gas shows during drilling reinforce the commercial gas potential of the formation, underpinning the company’s confidence in the project’s resource base.
The completion of these wells is slated for the end of May 2025, immediately followed by production testing. These activities are critical to establishing an independently accredited maiden 2P reserve, a milestone that will enable State Gas to negotiate access to pipeline infrastructure connecting to the Gladstone to Wallumbilla network and to apply for a petroleum lease over a significant portion of ATP 2062.
Expanding HDNG Supply and Commercial Opportunities
Alongside exploration, State Gas is advancing its high density natural gas (HDNG) supply arrangements. The company is working with partners and an initial customer to expand a dual fuel engine trial from two to six mine trucks, potentially supplying around 0.5 terajoules of HDNG per day. This expansion represents a substantial revenue stream and highlights the commercial viability of HDNG as an environmentally superior alternative to diesel in mining operations.
State Gas is also focused on improving the HDNG supply chain logistics to enhance transportation and handling efficiencies at customer sites. The company remains optimistic about the broader application of HDNG technology to other coal mines in the region, positioning itself as a key player in the transition towards lower carbon emissions in the mining sector.
Financial Position and Strategic Outlook
Financially, State Gas has strengthened its liquidity position through significant R&D grant funding received in February 2025, supporting the development of the HDNG plant and exploration activities. The company is managing costs prudently, including resolving an access dispute at ATP 2062 and advancing insurance cost recovery processes. Loan facilities totaling $1.7 million remain fully drawn, with interest rates at 15% per annum, reflecting ongoing capital management efforts.
Looking ahead, State Gas identifies several key value drivers for the coming year: growth in HDNG sales, external verification of the maiden 2P reserve to facilitate pipeline financing, and the commercialisation of HDNG technology and intellectual property. The company acknowledges risks inherent in exploration and development but is actively addressing them while capitalising on the positive macroeconomic outlook for natural gas in Australia’s east coast energy markets.
Positioning for Energy Transition
State Gas’s innovative approach, combining conventional and coal seam gas exploration with modular HDNG technology and virtual pipeline solutions, positions it well to meet growing energy demands. By enabling access to pipeline-quality natural gas in regions lacking infrastructure, the company supports industries seeking cleaner fuel alternatives during the ongoing transition to renewable energy sources.
As production testing progresses and commercial arrangements expand, State Gas is poised to move from exploration to early-stage production, potentially unlocking significant value for shareholders and stakeholders in the evolving Australian energy landscape.
Bottom Line?
With drilling success and HDNG expansion underway, State Gas is set to transform its Rolleston West assets into a commercial gas producer, but upcoming production tests will be pivotal.
Questions in the middle?
- Will production testing confirm reservoir permeability and commercial flow rates as anticipated?
- How soon can State Gas secure pipeline access and petroleum lease approvals to advance development?
- What is the scalability potential and market adoption timeline for the HDNG technology beyond initial trials?