Central Petroleum

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29th Oct '09 by Murakami

11 comments 3098 reads

This is a general discussion thread in relation to Central Petroleum - more to be added to header in due course.

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Murakami

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11 comments

emptyend

29th Oct '09

I was quite intrigued by various aspects of their presentation at Oilbarrel yesterday.

Website here: http://www.centralpetroleum.com.au/
...and a similar presentation here: http://www.centralpetroleum.com.au/files/Sep%202009%20Good%20Oil.pdf

One of the more intriguing points was the claim that trucking oil to Darwin would cost A$16-18 per barrel - apparently less than it costs to move oil from Moomba by pipeline.

The main takeaway for me was that this remains a vast but largely unconventional play. Oil targets in Perdika (for example) were apparently "elusive". Unconventional gas also seems to be the focus of their partners (including BG) - which is a further constraint on short-term upside.

There's little doubt though that this will be an interesting situation for the long-term, assuming UCG and coal-seam gas technologies continue to develop - but it is far from clear how much of that potential upside might be captured by Central rather than a player with much deeper pockets.

ee

marben100

29th Oct '09

In response to Rob's query re Central Petroleum (ASX:CTP) on the Aminex thread, I'm afraid I wasn't overly impressed. ISTM that huge CAPEX is required to turn their prospective projects into viable ones. A quoted GTL CAPEX of $75k/bpd of production, though reasonable, doesn't look hugely attractive to me. That's equivalent to paying $7.5m for a well & infrastructure to produce 100bopd of oil. I think there are companies offering considerably more attractive returns than that. I formed the impression that CTP were trying to spread meagre resources over a huge area, rather than focussing on any one prospect with near-term potential.

Regards,

Mark

robs12

30th Oct '09

Thanks for your thoughts chaps (& the new thread!) - appreciated.

Superhard

31st Oct '09

It has taken John Heugh more than 10 years to secure the largest onshore Australian O&G (conventional and unconventional) exploration acreage - 250,000 square kilometres. The company listed in 2006. Targets include conventional Oil and Gas, including Helium as well as unconventional gas (syngas) from CSG/UCG.

There are a number of interesting reports on the Central Petroleum website. I recommend reading the Mulready Consulting report on the the potential for Underground Coal Gasification combined with Gas-to-liquids technology to unlock the energy potential of Central's Central Australian tenements.

The numbers are huge and at first glance appear ridiculous. In excess of a trillion tons of coal providing 1.25 trillion barrels of liquid petroleum products from synthetic gas (syngas) produced via UCG - thats the unconventional bit. Couple that with the fact that the O&G leases surround both an existing gas and an existing oil producing field and that the Helium potential was proven by a previous well - and I believe that Central warrants some further analysis.

Regards
G

Superhard

31st Oct '09

sorry, I should also have mentioned that Central's JV partners (including BG) approved the commencement of a drilling and seismic program on 23 October 2009 to assess the extent and quality of the coal resource and its suitability for UCG/CSG via a 5-well drilling program and a significant seismic program (for the more convential O&G stuff)

JPGH

1st Nov '09

Mark

whilst I am not at all bullish in GTL the installed cost/bpd production of $75k/bpd is for high value "refined" sulphur free products (Naphtha, kero, diesel, lubricant and LPG). These products e.g kerosene/diesel typically sell at premiums to usual refinery diesels/kerosones. Ditto with lubriucants products. So its probably a bit unfair to compare with 100 bpd oil well. I'd say more like 300 boepd well that has no decline for 20 yrs could probably be a probably a fairer comparison.

The GTL investment case/business model works best for low value feedstocks such as stranded gas, CBM and coal.

I am much more bullish on future of CTL as a replacement for oil as a source of liquid transportation fuels......although I cant see (from an investor POV) the merits in investing in seed CTL companies who own vast stranded coal resources, as like GTL, the coal feed needs to be supplied at a low value to get the overall economics to deliver value to investors. Seed CTL companies would need huge dilution in order to participate in the full/overall CTL investment model.

JPGH

marben100

2nd Nov '09

Thanks for your comments JPGH

Interstingly, here's a report on another Aussie company with similar aims: http://www.minesite.com/nc/minews/singlenews/article/syngas-has-ambitious-plans-for-its-coal-to-liquids-projects-in-south-australia/1.html

Syngas’s Merrill Gray cuts an interesting figure sitting across from Minesite in a Cheapside Starbucks. She’s just delivered the news that her company, Syngas, currently capitalized on the ASX at around A$10 million, will need of the order of US$2.26 billion to get its coal projects in South Australia into production. That’s some funding gap she’s going to have to cover, and some disparity in valuation, but she doesn’t break her stride.

ISTM that such companies, including CTP, are impossible to value, as no-one can know how much diltuion the early investor will suffer, and hence any investment now is a pure gamble. It would seem much more sensible to invest when (and if!) they do their main fundraising and there is a real project on the blocks.

Another huge issue is environmental permitting and handling of CO₂ produced as a by-product. Large amounts of CO₂ pumped into the atmosphere could prevent such projects ever getting off the starting blocks. The biomass blending mentioned in the article can help address this issue, though. See http://en.wikipedia.org/wiki/Coal#Liquefaction

Cheers,

Mark

Mattybuoy

7th Nov '09

IMO the best way into the very interesting coal part of CTP's potential is via the technology and/or finance providers, who will farm-in at some stage. The company already has a bazillion shares out and who knows how much more dilution there will be in the future.

BG is already there for the CBM, and I would not be at all surprised if one of the 3 Aussie UCG outfits turns up at some point too.

It seems to me that CTP can only really take off on its own and become self-financing is if it were to find a conventional gusher or two. I have no idea what the likelihood of this is, but past drilling for conventional oil has not turned up much. Though given the size of the area involved that is perhaps not surprising.

So, to play this vast potential I would probably have a basket of 5 stocks, being:

ASX:CTP
LSE:BG.
ASX:CNX
ASX:CXY
ASX:LNC

Not my actual positions I might add :-)

Mattybuoy

7th Nov '09

P.S.

Syngas and the other above-ground coal gasifiers (like Altona) are IMO to be avoided until such time as at least one of them can prove that the massive funding and environmental issues can be overcome.

Mattybuoy

19th Nov '09

Correction - CTP only has around 500m shares in issue, not a "bazillion" as I mis-stated. So, double that up and you probably have a reasonable figure going forward. I like a nice round billion shares, though of course 100m is better :-)

Now, more usefully (maybe). A couple of additional companies that seem to be involved with CTP and the generalised Coal 2.0 play in Australia:-

Red Sky Energy (ASX:ROG) - Farm-in partner to some of CTP's many licenses. Large land position in other areas which may end up becoming future CSG/UCG provinces, but which are currently securely lodged in the "stranded" bucket.

Regal Resources (ASX:RER) - Same management as Red Sky. Claim to have a UCTL (Underground Coal To Liquids) process which they will be trialling in the first half of 2010.

Just FYI. I have no shares in any of these outfits (except CNX - Carbon Energy mentioned previously).

Mattybuoy

19th Nov '09

Syngas

Just a small ramble ...

Syngas (synthesis gas) is the core of Coal 2.0. It is a gas comprised of methane, hydrogen, carbon monoxide and carbon dioxide in varying quantities.

What can you make out of it?

In order of approximate simplicity/capex requirements:-

Electricity

Synthetic Natural Gas (SNG)

Ammonia

Methanol

Diesel/Naptha/Kerosene (Fischer-Tropsch)

---

The last in the list is what conventional "GTL" seeks to produce, but it's probably (definitely IMO) not the way to go since it is the most expensive and difficult processing route available.

Note: Methanol and Ammonia are currently usually produced from natural gas but this must be converted to Syngas first - key point.

Ammonia, SNG and Methanol can all be used as vehicle fuels, hypothetically speaking, and regardless of that they all have widespread existing uses for which the world has an infrastructure already in place. Though not perhaps always in the right place ;-)

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Murakami

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