Kinetiko Energy Ltd (ASX:KKO, OTC:KKOEF) is set to take a “transformative step forward” in its strategy to develop an energy solution for South Africa by commercialising advanced shallow conventional gas projects in Mpumalanga Province with preparations underway for five production test wells.
Site preparations have started for the first of these wells, with drilling equipment and consumables arriving on site. Conductor casing and water monitor well drilling will take place initially and this work is expected to be completed within four weeks.
The production test drilling rig is expected to be mobilised to site in late August for spudding of the first well 271-23PT in early September.
“Transformative step forward”
"The upcoming five-well production test program represents a transformative step forward for Kinetiko Energy," Kinetiko executive chairman Adam Sierakowski said.
"With site preparations already underway and drilling set to commence soon, we remain poised to unlock the potential of the existing 6 TCF Contingent Resource (2C) discovery within the Mpumalanga Province which is currently equivalent to 1 BBOE and expected to grow significantly.”
Five-well program
Following a recent successful capital raising, the upcoming production test program will involve drilling five separate production wells, which will be individually flow-tested for up to 90 days.
The drilling of each well is expected to take four to five weeks to be completed with the entire production test program expected to take nine months.
Indicative production test well locations.
Once drilling is completed, each well will undergo a dewatering process anticipated to take a few days and once this is complete, flow testing will begin for each individual well.
Kinetiko expects the results will confirm the potential of a future gas field development immediately adjacent to the test production well.
Sproule B.V.'s initial reserve calculation assumed 50,000 SCF/day of gas from each well. Achieving extended flow rates from this appraisal program above this level should significantly improve the development economics and reserve estimates.
“A critical milestone”
"Each well is strategically positioned to optimise gas reserves certification and is adjacent to existing infrastructure, making this program a critical milestone towards demonstrating the commercial viability of the basin,” Sierakowski said.
"Core well drilling adjacent to the first production test well 271-23PT discovered 131.5 metres of gassy pay zones.
“The production testing program will provide invaluable data on flow rates and depletion curves, essential for modelling the economics of future production clusters."
The five production appraisal wells will be drilled in sequence and have been located based on previous exploration success.
Bottom hole targets planned for the five wells have been selected to interpret multiple gas reservoirs and optimise gas reserves certification.
Adjacent to infrastructure
Each well is also next to existing power infrastructure, including power station, pipeline, transmission lines and potential offtake customers. The Mujuba Power station is about 9 kilometres from the first production test well.
This means that each well has the potential to be the first well of a future production cluster gas field development.
In addition, each production test well is strategically located to interpret multiple gas reservoirs and optimise gas reserves certification potential.
To mitigate the technical risk associated with future development planning and to provide data regarding the life and size of each potential cluster of production wells, the key information derived from production testing will be the extended flow rates from each well and the depletion curve over an extended period of flow stability that will allow calculation of the production life of each well.
In turn, this will be used to estimate the number of production wells needed for each development cluster and how many years the clusters will produce gas before additional wells need to be added to the cluster to increase gas delivery to the end customer.
This information will be used to model the economics of each production cluster and feasibility studies.