State Gas Nears Maiden 2P Reserve Certification, Eyes HDNG Growth
State Gas Limited is on the cusp of securing its first 2P Reserve certification for the Rolleston West Project, while progressing its innovative High Density Natural Gas technology despite financial and operational hurdles.
- Maiden 2P Reserve certification at Rolleston West nearing completion
- Positive exploration results confirm commercial viability of coal seam gas
- HDNG technology commercialization advancing amid slowing coal market
- Capital constraints persist with delayed R&D grant receipts
- Ongoing land access dispute impacting project operations
Rolleston West Reserve Certification Approaches
State Gas Limited (ASX – GAS) is advancing steadily towards a significant milestone with the maiden 2P Reserve certification for its Rolleston West Project in Queensland. Independent certifier Netherland, Sewell & Associates Incorporated (NSAI) is close to finalising the assessment, which will independently verify commercially recoverable coal seam gas volumes. This certification is a critical step that will underpin the project’s economics, support petroleum lease applications, and facilitate pipeline access negotiations.
Exploration Success Reinforces Project Potential
Recent drilling and production testing at Rolleston West have yielded encouraging results, confirming a large, high-quality coal seam gas resource with good permeability. Two new exploration wells have supplemented historical data from the Rougemont well system, enhancing confidence in gas flow rates and composition. These findings support the company’s hypothesis of a continuous gas-bearing formation across the permit area, setting the stage for a Concept Study early next year to refine development plans and costs.
HDNG Technology Commercialization Progresses
State Gas continues to promote its pioneering High Density Natural Gas (HDNG) technology, which offers a diesel fuel alternative for coal mines and industrial users. The Rolleston West HDNG plant, commissioned in mid-2024, demonstrated promising emissions reductions during a pilot project supplying compressed gas to mining trucks. Although the initial pilot did not expand as planned, the company is engaged in advanced discussions with several Bowen Basin coal mine operators. HDNG’s potential to reduce emissions and mitigate diesel price volatility positions State Gas well in a market with over $2 billion annual diesel consumption.
Financial and Operational Challenges
Despite technical progress, State Gas faces capital constraints exacerbated by delays in receiving expected R&D grant payments due to an Australian Taxation Office review. To bridge this gap, directors have provided working capital loans, and the company has curtailed non-essential spending and scaled back field operations. Additionally, an ongoing land access dispute at ATP 2062 has resulted in legal proceedings and increased costs, complicating site activities. The company remains committed to resolving these issues cooperatively while maintaining compensation payments to the landowner.
Outlook and Strategic Positioning
Looking ahead, State Gas plans to accelerate project development and HDNG commercialization once the R&D grant funds are secured. The company is also exploring monetization options for its Reid’s Dome conventional gas discoveries, potentially leveraging shared infrastructure with Rolleston West. With a strong position in the Bowen Basin and a unique technology offering, State Gas aims to contribute meaningfully to Australia’s east coast gas supply and support the transition to lower-emission energy sources.
Bottom Line?
State Gas stands at a pivotal juncture, with imminent reserve certification and HDNG commercialization poised to unlock value, if capital and legal hurdles can be navigated successfully.
Questions in the middle?
- When exactly will the maiden 2P Reserve certification be announced and how large will it be?
- How will the ongoing land access dispute impact timelines and costs for Rolleston West development?
- What strategies will State Gas pursue to secure additional capital beyond director loans and delayed R&D grants?
