Blue Energy: Sapphire 4 Flows Gas (Australia)

Blue Energy Limited provides the following update on drilling activities in ATP814P permit.

Sapphire 4

As previously advised, the Sapphire 4 pilot well was undergoing completion activities to prepare it for testing. These activities have now been finalised. Surface equipment was installed and the well was placed on production test last week. Pumping has been underway for only a few days.

Gas production was observed almost immediately on commencement of the pumping operations (Figure 1). This is an extremely positive sign for such an early phase of the pilot test process. This confirms the initial DST result as well as the core analysis results from the well which indicated high gas saturation for this section of the Fort Cooper Coal Measures.

Sapphire 4 intersected a significant thickness of net coal (62 metres) in the Rangal, Fort Cooper and Moranbah Coal Measures and flowed gas to surface from the Fort Cooper Coal Measures on open-hole Drill Stem Test.

The forward plan on Sapphire 4 is to continue to pump the well and de-pressure the coal seam, whilst gathering production data to assess ultimate productive capacity of the coals. It will also allow information to be gathered on water quality and production rate, which are essential to planning for future development of the resource.

The Sapphire Block of ATP814P has been independently assessed by Netherland, Sewell and Associates to presently contain 75PJ of 3Preserves and 326PJ of 3C Contingent Resources.

Monslatt 7 and 8H

The Monslatt 7 and 8H pilot pair have now reached a pumped off state and continuous gas flow into the wellbore is occurring. This follows several attempts to obtain a continuous and un-interrupted pumped off state over the last 12 months. The delays were caused by combinations of regulatory delays, land access delays, and weather interruptions. Gas flow from the well has not yet reached economic rate.

Monslatt 5P

Pumping on the Monslatt 5P pilot well continues to depressure with water withdrawal rates of approximately 80 bpd recorded. Significant gas breakthrough is still awaited.

Monslatt 6P

After being pumped off with gas to surface, Monslatt 6P is currently shut-in for a long term pressure build-up to establish specific reservoir parameters.

Corporate

The Company has been notified by KOGAS that it intends to exercise its farm-in option in relation to ATP814P, bringing the option period to a close. The exercise of the option initiates discussions between the parties, on a non-exclusive basis, on potential farm-in terms for ATP814P. To date terms have not been discussed, and the Company cannot say with any certainty that an agreement on terms will be reached.

The farm-in option was granted to KOGAS as part of the Share Placement Agreement executed between Blue Energy and KOGAS in June 2009. The option period has been extended several times since its initial grant.

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LNG World News Staff, July 04, 2012; Image: Blue Energy