Monday, July 14, 2014

Buru Energy running scared of community opposition

Buru Energy Limited (ASX:BRU) has released an operations update  outlining its appraisal activity and tight gas pilot exploration program. However the project is behind time as no work was able to commence until the approvals were confirmed and the company is now running into more delays with the approaching wet season. Buru has implemented a three phase program that is now expected to deliver the results of its fracking by August 2015.

Phase 1
August to October 2014

Wellsite preparation and civil works including the construction of the water holding and flowback fluid retention ponds, flare pits, and associated civil works. This work is complete at the Asgard site and underway at the Valhalla North site. These are major civil
works required to support the currently planned frac configuration.

Well conditioning to ensure the well bores contain an operationally appropriate brine solution. This work will be undertaken with a coiled tubing unit.

Cement bond logging to confirm previously obtained data.

Conducting of “mini fracs” or Diagnostic Fracture Injection Tests
These are routinely conducted as part of frac programs and consist of fracs of a single zone by perforating the zone and injecting brine and observing the resultant pressure responses.

This operation does not involve any flow back from the well and
is performed with a relatively small crew and equipment package and does not require the mobilisation of the full frac crew. The data from these mini-fracs is used tooptimise the design of the main fracs to ensure they provide definitive results at the lowest cost.

Phase 2
August 2014 to March 2015
Phase 2 will take place during the Kimberley wet season. This is a planning, validation and optimisation phase to ensure all operations and logistics are optimised and all contracts are the most cost effective. The design of the fracs will also be reviewed incorporating the results from the DFITs to ensure the highest probability of obtaining definitive results at the lowest cost.

(“mini fracs” or Diagnostic Fracture Injection Tests involves injecting fluid at increasing pressure until the rock begins to crack. The well is then sealed and the pressure monitored for a couple of weeks as the fluid leaks into the cracks.  the purpose of the mini-frac is to “determine whether the formation is capable of being hydraulically fractured”. Having already measured the gas content of the shale from the core sample last year, the mini-frac results would be a significant step towards shale gas extraction in the Canning Basin)

Phase 3
March to August 2015
This phase will include mobilisation of the frac spread, undertaking the fracs and then a Three month flow back period to ensure the data obtained will allow definitive decline curves to be calculated.

The current estimated total cost of the three phaseprogram is in excess of $40 million. Buru Energy’s 50% share of this cost will be covered by the previously announced agreement with Alcoa

Buru also says its program of staff and cost reduction and internal re-organisation is now almost complete and it has enough cash on hand to complete all proposed activities for the remainder of 2014. Shares in Buru Energy are trading 6.5 per cent lower at $0.94. 

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