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L&M Energy celebrates the rise of CSG

The company’s Managing Director Coal Seam Gas Kent Anson says that most major upstream exploration companies are moving into unconventional resources such as coal seam gas (CSG) and that super-major exploration companies predict that as much as 16 per cent of production in 2010 will be from unconventional resources.

Mr Anson said that another indication of the rise of CSG was the fact that around 20 per cent of upstream global mergers and acquisitions in 2008 were in CSG.

He said that over the past five years, CSG investment was the number one oil and gas strategy and for every

$US1 invested between January 2004 and January 2009, CSG returned $US4.40.

L&M Energy (LME) has witnessed the rapid increase in global CSG production, particularly in Australia, where CSG now comprises 30 per cent of 2P gas reserves.

LME believes that companies involved in CSG production have followed a similar value generation path:

* Bringing investors on board
* Growing reserves and production
* Building materiality
* Obtaining best gas price
* Potentially growing through merger and acquisition activity.

Focusing on New Zealand

New Zealand has an abundance of coal, with some 15 billion tonnes of resources. Not all of that coal will contain gas, but LME believes that the company has some of the best acreage within which to find it.

Prior to LME’s move to acquire L&M Coal Seam Gas, the company had drilled five core wells with all of them finding quantities of methane within the coals and a number of wells designed to define coal extent. All of the wells found CSG, in amounts of up to 6.75 cubic metres of methane per tonne of coal.

LME has a total acreage position of nearly 13,000 square kilometres and more CSG exploration permits than any other company in New Zealand.

The company now holds New Zealand’s first independently certified CSG reserves: 173 petajoules (PJ) of

3P at Ohai on the South Island.

Coals in the permit have gross thicknesses of up to 50 metres with individual seams as much as 15 metres thick. Gas contents are higher than in the company’s surrounding permit, holding as much as 10 cubic metres of methane per tonne of coal.

Commercialising CSG resources

There are a number of gas commercialisation options in the South Island ranging from electricity generation through to compressed natural gas or LNG for transport fuel and reticulation into local domestic and industrial markets.

Given that LME also holds exploration rights over substantial conventional gas condensate targets in its exploration permits in Southland, there is also the potential to underpin other developments, such as petrochemical production.

Plans are in place to both increase this 3P reserves position and certify maiden 2P reserves through an aggressive and focused 2010 CSG drilling campaign.

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