ngy prelim permpilot economics

8/11/2019 NGY Prelim PermPilot Economics

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ASX ANNOUNCEMENT

17 October 2012

ABN 50 009 126 238

PRELIMINARY PERMEABILITY RESULTS SHOW 11MD

11MD DEMONSTRATES GOOD ECONOMIC POTENTIAL

PILOT PROJECT ECONOMICS

PRELIMINARY PERMEABILITY RESULTS SUPPORT ECONOMIC VIABILITY OF PILOT PROJECT

NuEnergy Gas Limited (ASX: NGY) (NuEnergy) is pleased to announce that preliminary

permeability tests at the Maura Enim well #2 site have shown 11 millidarcy (mD) ofpermeability (mD is a universal measure of the ability of a porous material to allow fluids and

gas to pass through it).

The permeability result is important for Coal Bed Methane (CBM) production as it indicates

that gas can flow from a coal seam at a rate which will support an economic project.

11 mD compares with other sub-bituminous coal basins as follows:

Comparison of Characteristics from selected commercial CBM Projects:

B i Fi ldCoal Gas


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B i Fi ld

ABN 50 009 126 238

Location Map - NuEnergys Indonesian PSCs, well location and surrounding infrastructure:

Dewatering to

commence Oct-12


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NuEnergy Gas Limited

On Track in IndonesiaPilot Project EconomicsMuara Enim, South Sumatra

17 October 2012


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Contents

2

Summary

Development Phases

Well Deliverability and Production

Project Economics

Next Steps

Appendices


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Summary

NuEnergy Gas Limited is a Resources to Reserves Focused Exploration and ProductionJunior

- ASX listed emerging unconventional gas and ancillary power company (ASX:NGY)- The Companys core Indonesian assets are currently under appraisal and development

Short Term Goals and Priorities- Establish a Coal Bed Methane (CBM) gas-to-power project in South Sumatra, Indonesia

- Monetize cornerstone assets with operating income and booked reserves

Appraisal Results and Pilot Production Development:

- Project Economics: Currently demonstrating commerciality of NSAI certified 4.2 Tcf of prospective gas resourceswithin South Sumatra

- Muara Enim (ME) CBM well #2 drilled and tested, completion and dewatering commencing October 2012

- Initial permeability testing has indicated 11mD which is above the economic threshold

- ME Pilot Gas Production Project status at the ME#2 well site:

Q3 2012 Dewatering and site facilities installed ready for commissioning

Q4 2012 Initial Gas Production and installation of small scale Power Generation unit

2013 Gas-to-power electricity sales into local grid estimated @ US$0.12c per/kWh

2013+ NPV10of >US$3.5 million for Pilot Gas production and 3 MW Power project (combined)

Development Progress and Larger Scale Gas Production- Growth underwritten by under-supplied and high-priced, local and export gas markets

- Further Development Phases: Pilot success to be followed by larger scale production, accessing local gasinfrastructure and demand with field development planning underway for gas production of 10 -to- 100 mmscf/d

- NPV10of US$30m and US$363mfor the 10 and 100 mmscf/d second phase projects

- Additional upside exposure via pre-emptive rights to underlying shale gas resources in Production Sharing

Contracts (PSCs)NSAI: Netherland Sewell & Associates Inc.

3


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Development Phases

PHASE 1

Pilot Project

1mmscf/d gas sales

1-3MW Electricity sales

PHASE 2

Pilot Expansion Phase

Scaled CBM production &

gas sales

PHASE 3

Exploration Upside

New CBM & Shale Gas

TheStaircaseof

InvestorReturns

1mmscf/d, 3MW, gas to power,

4+4 wells

10-100mmscf/d gas sales,

115x -to- 1040x wells

Shale Gas Development and New

CBM PSCs

Q4 2012 - 2013 20132015/6 2015/6 +

Cornerstone company project

Low cost and risk

Demonstrates commerciality

Demonstrates concept scalability

High probability of success

Enabled monetization route

IP transferable into Phase 2

Scalable concept, upside potential Strong local market gas demand

Very strong regional Gas prices

Project size linked to well deliverability

Scalable, modular development model

IP gains, transferable into Phase 3

Longer lead exploration opportunities

Big blue sky potential

Company game changer opportunitieswith exploration success

Portfolio diversification benefits

Early entrant benefits in emerging

unconventional CBM/shale plays


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Well Deliverability & Production

Production Development Overview

Key goal in 2012/2013 is to prove well deliverability of the

Suban and Mangus coal seams in Sumatra, Indonesia NuEnergy on track to achieve this goal with a structured

and risk mitigated development strategy

Phased program of modular and scalable production

facilitiescentral to the development strategy

Phase 1 Pilot Project well development will entail an initial

4x well pad

4-well Pilot is the scalable building block to be replicated in

the Phase 2 planned expansion.

Well #2 de-watering to commence Oct-12 and production

tests to follow, valuable insight will be gained to catalyse

NuEnergysexpansion phase

Well Deliverability & Profiles

Graphs to the right depict well deliverability and project

production profiles, as estimated from ME well #2 results Well plateau estimated between 0.25-0.75 mmscf/d per

well

Over project life:

~8 wells are required for the pilot CBM to power project

~115 wells are required for 10mmscf/d project

~1040 wells are required for 100mmscf/d project

Forecast 1-Well Deliverability

Phase 1-2 Project Production Profiles

-

20

40

60

80

100

120

ProductionProfile

(MMscfd)

Year

100 MMscfd

10 MMscfdPilot Project


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Project Economics

Base Case Results

Phase

NPV

(US$MM)

IRR

(%)

Payback

Period (yrs)

Total

Production

Estimated

Timing

1a Pilot CBM Gas $2.18m 34.2% 3.4 7.4 bcf 2012/13

1b Pilot Power $1.50m 15.7% 8.4 3 MW 2012/13

2a 10mmscf/d CBM $29.8m 20.3% 5.0 92.7 bcf 2013-2015

3a 100mmscf/d CBM $363.4m 32.0% 4.9 882.3 bcf 2013-2016

Conservativeproduction & cost

assumptions utilized for valuation

Robust Pilot Project

economics observed

Attractive returns expected in ME

Expansion Phase cases

Each Project exhibits robust economics under conservative base case valuation assumptions

Projects are highly sensitive to gas price & well deliverability (well count & cost)

Base assumption of 0.250mmscf/d plateau per well

Carried nominal well costs of US$1.6m-to- US$1.9m

Refer to Appendix 1 for fiscal terms and assumptions, Appendix 2 for market information

NuEnergy anticipates significant well cost reductions through economies of scale and rig ownership

*

* Economic Pilot Project model has been audited by Wesvault Pte Ltd


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Next Steps

Outcomes & Key Points:

First mover advantage with the launch of a rapid and small, fit for purpose 4+4 well development

A conservative development strategy to prove-up the concept and demonstrate well deliverability

Cornerstone company project, to establish initial operating cash flow, stability & operating history

Low cost and accelerated development aided by proximity to market, underlying demand and high quality

water and gas requiring minimal processing prior to shipment to market

A springboard for NuEnergy to launch into Phase 2, with full scale CBM gas development (refer Appendix 3)

A stable platform for building on Phase 3 shale & exploration upside

Gas

Well Pad4 wells per pad

Water Clean-up

& Disposal

Flare

Gas Treatment PlantGas Separation,

Dehydration &

Metering

Local Power

Grid

Phase 1 PilotPilot Gas to Power

3 x 1MW

Capture First Mover

AdvantageEarly Cost Recovery/ Revenue

Generate Proof of Concept +

Reserves

Pilot Project Development


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APPENDICES


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APPENDIX 1:FISCAL TERMS AND ASSUMPTIONS


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Muara Enim Muara Enim II Rengat

Date PSC Awarded

November 30, 2009

April 11, 2011

November 30, 2009

PSC Termination Date

November 30, 2039

April 11, 2041

November 30, 2039

Joint Venture Participation

Factors

NuEnergy (40%)

NuEnergy (30%)

NuEnergy (100%)

PERTAMINA (60%)

SUGICO (30%)

PERTAMINA (60%)

Exploration Period Award Date to November 30, 2014 Award Date to April 11, 2016 Award Date to November 30, 2014

Acreage Area (square km)

652.60

1175.5

2,995

First Tranche Petroleum (FTP)

To Government10%

10%

10%

Profit Share Split

(Government : Contractor)21.875% : 78.125% 25% : 75% 21.875% : 78.125%

Maximum Cost Recovery peryear

90%

90%

90%

Corporate Tax (%) 42.40% 42.40% 42.40%

Well Commitments Over

Exploration Period

core hole (2); exploratory (8)



PSC Fiscal Term Summary


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Valuation Assumptions

General and Fiscal Assumptions

Equity valuation / results: US$Millions Resource volumes presented un-risked

Prices & Costing Basis: Flat Real (not escalated)

Discount rate: 10% real

FTP to Govt. of Indonesia: 10% of Gross Revenue

PSC Contractor Profit Split: 78.125%

Working Interest: 40% NuEnergy (100% of PowerCo)

Corporate Tax Rate: ~42.6% (on Profit Gas)

Economic Evaluation Period : 25 years/End of PSC

Cost Assumptions

Average well cost: $US 1.94m

Nodal compressor cost: $US 2.00m

Well pad cost: $US 0.72m Well productivity : 0.25 mmscfd peak prodn/well

5% own use gas for 10 & 100 mmscfd cases

Pricing & Product Assumptions

Pilot CBM Gas Sales Price: US$7.50/mmbtu (flat) to2028 then market pricing at $15/mmbtu thereafter

Pilot Project Power Sales price: US$0.12c/kWh

(2012, real)

Expansion Phase (10 to 100mmscf/d cases) Gas

pricing matched to Duri & Singapore Export pricing

of US$15.00/mmbtu (flat)

Sensitivities Run

Pilot Project Gas Price: US$7.50/mmbtu: +/- 25%

ME Expansion Projects @ est market gas price:

US$15/mmbtu +/- 25%

Electricity Price: US$0.1272; Base Case +/- 25%

Gas to Power efficiency: 2.79 MW/mmscfd +/-10%

Gas Resources: Base Case +/-25%

Well Deliverability @ plateau:

(Base Case) Low ~ 0.25mmscf/d

Mid ~ 0.50mmscf/d

High ~ 0.75mmscf/d

Costs, Capex & Opex: Base Case +/- 40%


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APPENDIX 2:MARKET INFORMATION


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Sumatra Power & Industrial Demand

0

500

1000

1500

2000

2500

3000

3500

2010 2013 2016 2019 2022 2025

MMSCFD

Contracted Demand Committed Demand

Potential demand Supply (Conventional only)

Source: National Gas Balance 2010-2025, MoE Indonesia 2010 (latest version)

Total Central & South Sumatra Supply-Demand

The Sumatra domestic gas market is 2.5 Bcf/day

This market is undersupplied currently and the supply deficit is forecast to grow from 0.5 Bcf per

day in 2013/4 to 1 Bcf per day in 2022

Sumatra Power and Gas Infrastructure

Sumatra Represents a +2 Bcf/Day Gas Market Undersupply = 500mmscfd & Growing


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Chevron Duri Steam Flood Gas Market

The Chevron steam flood project is derived from an Enhanced Oil Recovery (EOR) project on the Duri oil field in

Central Sumatra which enhances the recovery of oil from the field through the injection of significant quantities of

steam into the oil reservoirs. Gas is used to heat water and convert it to steam and this steam is injected into theoil reservoirs. Gas is also used to power generators.

The current supply of gas to Chevron in Duri is circa 350 mmscfd through a 500 km pipeline from South Sumatra:

The third party open access pipeline to the Duri Oil Project (owned by Transportasi Gas Indonesia) charges a tariff for

gas transportation from South to Central Sumatra of US$0.62/mmbtu

Gas prices for this market are derived from the crude oil indexing on gas (circa 7595% crude oil equivalent)

currently circa $15/mmbtu.

Unsatisfied Demand from 2014 Crude Related Pricing Existing Pipeline to Market


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Singapore Gas Market

Two major gas supply through two different pipelines

under long term contracts

Grissik (South Sumatra)Singapore pipeline

Natuna offshoreSingapore pipeline

Strong demand with major gas users are the power plants

which are consuming about 80% of gas supply

Gas takes 80% of fuel mix for 10 000 + MW total capacity

Peak demand increase is 3.5% p.a

Potential additional supply from South Sumatra starting

2016 onward through the existing pipeline

Third party pipeline with current tariff is $0.69/mscf

50 mmscf/d Market Building from 2015 Pipeline Capacity from 2015HSFO/LNG Related Pricing

Source:Energy MarketAuthority

On-grid power

70%

Captive power

8%Industry

11%

Steam

8%

Residential &

Commercial

3%

Singapore Gas Demand Break-Down

Source: Energy Market Authority, Singapore

Petroleum

Products

18%

Natural Gas

78%

Other

4%

Singapore PowerGeneration Fuel Mix

0

100

200

300

400

500

600

2 005 2 00 6 2 00 7 2 00 8 2 00 9 2 01 0 2 011 2 012 2 013 2 014 2 01 5 2 01 6 2 01 7 2 01 8 2 01 9 2 02 0 2 021 2 022 2 023 2 024 2 02 5 2 02 6 2 02 7 2 02 8 2 02 9 2 030

Supply to Singapore (existing contract) Supply to Batam (existing contract)

Uncontracted supply (Pipeline Gas) Pipeline capacity


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High demand in West Java is driven by both the

power and manufacturing sectors:

West Java is the prime driver of the Indonesianeconomy

West Java energy consumption represents

approximately 50% of national energy demand

Supply from LNG terminals & South Sumatra gas

through two gas pipeline systems are in place to

meet gas demand:

The existing two gas pipelines (36 and 32) are under-

capacity already and only transport about 650 mmscf/d

for both pipelines crossing the Sunda Strait

The 3rdparty pipeline tariff is circa $1.74/mmbtu

Unmet demand, which will need to pay the marginal

price for gas (LNG import price), is forecast to grow

from 200mmscfd in 2013 to 1 Bcf per day in 2025

West Java Gas Market

ME & ME2 PSCs

Source: National Gas Balance 2010-2025, MoE Indonesia 2010 (latest version), excluding LNG

Significantly Undersupplied +2 Bcf per day MarketMarginal Price LNG


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APPENDIX 3:

DEVELOPMENT


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Development Schedule

Scalable Development

Scalable development design and favourable market dynamics, ensures the Muara Enim Gas Project has thepotential for rapid up-scaling

Development planning is currently underway to substantially augment the pilot projects CBM gas production to

between 10 & 100 mmscf/d

Open Access pipeline networks ensure gas delivery to market, in a region with strong domestic and international

(Singapore) demand.

Muara Enim Planned Development Schedule

NGY ME CBM Gas to Power Pilot Project

Drill / Complete / Connect Pilot Well CBM #02

Install Pilot Equipment

Drill / Complete / Connect Pilot Wells CBM #03/04

Commission Pilot Production Plant

Install power plant progressively up to 3MW

Commence gas and power sales

10 & 100 mmscf/d Project Development Upscale

Q2 Q4

2012 2013 2014 2015

Q3 Q4 Q1 Q2 Q3 Q1 Q2 Q3Q4Q1 Q2 Q3 Q4 Q1

2016

Q1 Q2 Q3 Q4

Muara Enim Expansion PhasePilot Project


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Development Facilities Summary

The table below illustrates key development planning assumptions behind NuEnergys Indonesian project suite

Structured development planning and well technology are critical to maintaining low well & total project costs

Beyond the pilot project, NuEnergy intends to capture economies of scale in drilling and facilities development

Modular development and high gas and water quality all serve to reduce capex and opex

H1: Pilot Phase H2: Expansion Phase

Description Pilot Project 10 mmscfd 100 mmscfd

Reserves (Bcf) 7.3 92.7 882.3

Well Count 8 115 1040

Pilot Pad 2 30 260

Nodes - - 26

Compression Nodes - - 4

Central Export Hub - 1 1

No. of Compressors

- Nodes - 10 104

- Compression Nodes - - 8

- Export - 2 2

Power Plant (MW) - -

Modular Facilities Scalable Productivity Through Technology & Economies of Scale


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Case 2 is a single Nodal Area which contains 80 wells and 4 nodal compressors to feed the export compression plus associated gathering equipment.

Case 3 is case 2 scaled up to comprise up to 13 of Nodal Areas across the PSC where there are thick Suban coal targets. Also requires intermediate compression stations & pipelines.

For map clarity the 4 nodal compressors per Nodal Area are not shown except for case 2. Each Nodal Area does has 4 nodal compressor stations.

Residential Road

III

III

IV

V

VI

VIIVIII

IX

XXI

XII

XIII xx

LEGEND

Country Road

Existing Gas Pipe

River

2 Pilot Areas with total of 8

producing wells. Within the

yellow circle, diameter of 1km.

A Nodal area which

comprises 20 Pilot Areas

(ie: 10 yellow circles) plus

4 nodal compression

installations, 80 wells per

Nodal Area.

GMB ME & ME II

N

Nodal / boost compression

installation, nominal 4 within the

nodal areaIntermediate compression

station

Gas Intra PSC Trunkline, 40km,

12 inch.Gas Trunklineconnecting to

Java Gas Transmission line,

50km, 16 inch.

Export HP compression station

Case 2 here: Nodal

Area of 80 wells ~

10 mmscfd. 4 nodal

compressors feed

the export comp.

Residential Road

III

III

IV

V

VI

VIIVIII

IX

XXI

XII

XIII xx

LEGEND

Country Road

Existing Gas Pipe

River




A Nodal area which



4 nodal compression


Nodal Area.

GMB ME & ME II

N




station




50km, 16 inch.

Residential Road

III

III

IV

V

VI

VIIVIII

IX

XXI

XII

XIII xx

LEGEND

Country Road

Existing Gas Pipe

River




A Nodal area which



4 nodal compression


Nodal Area.

GMB ME & ME II

N

Residential Road

III

III

IV

V

VI

VIIVIII

IX

XXI

XII

XIII xx

LEGEND

Country Road

Existing Gas Pipe

River




A Nodal area which



4 nodal compression


Nodal Area.

GMB ME & ME II

N




station




50km, 16 inch.

Export HP compression station

Case 2 here: Nodal

Area of 80 wells ~

10 mmscfd. 4 nodal

compressors feed

the export comp.

Muara Enim Conceptual Development Plan


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THANKYOU

ngy prelim permpilot economics

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