Company Information for IGas Plc

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Company Statement

Founded in 2003, Island Gas Resources Plc (IGas) is potentially one of the UK’s leading gas companies.

IGas was set up to produce and market gas which is found in seams of coal (CBM).

The coal seam both generates and traps the gas, which can be extracted by drilling horizontally into the seam and collected for use as fuel.  Coal Bed Methane is exactly the same as other forms of natural gas, and is used to provide both industrial and domestic power and has the potential to be an important new source of energy for the UK.

The CBM industry in the UK is in its infancy, but with the continuing decline in natural gas from the North Sea, it is likely to become an increasingly attractive alternative potential source of gas. CBM has become a significant source of gas both in North America and Australia over a relatively short period of time during which both have seen an almost exponential growth in CBM production.

IGas is incorporated in the UK and has ownership interests ranging from 20% to 100% in eleven Petroleum and Exploration Development Licences (PEDLs), 100% ownership of two methane drainage licences (MDLs) and 50% ownership of three off shore blocks under one seaward petroleum production licence (SPPL).

The Licences cover a gross area of approximately 1,756 sq km and according to independent experts, who have reviewed all eleven licences, the risked mid case estimate of IGas’s share of Gas Initially In Place (GIIP) is 2,508 billion cubic feet (bcf), or  411 milllion barrels of oil equivalent (boe).  DeGolyer and MacNaughton has estimated our Net Contingent Recoverable Resource at 821 bcf (3C).

IGas’s areas of operation are Cheshire, Yorkshire, Staffordshire and the North Wales coast.

Operations and Technology

IGas currently has interests in 11 Petroleum and Exploration Development Licences (PEDLs), covering a total area of 1,754 square kilometres in the North West of England. All except PEDL 78-2 are held in joint ventures arrangements with Nexen,  IGas' equity participation varying from 20% to 50%.  The Company is Operator and has 100% equity interest in PEDL 78-2, and also has an interest in an offshore Seaward Petroleum Production Licence (SPPL 1481) on a 50/50 equity participation with Nexen. Nexen is the Operator of all other licences, and much of the initial operations are financed through carry arrangements.

PEDL 193, PEDL 184 and PEDL 190 were awarded to the IGas/Nexen consortium by the secretary of state in the 13th onshore licensing round announced in May 2008. These were all within 15 kilometres of IGas’s existing operations and added a further 646 square kilometres to the existing acreage.

Following an independent assessment by Equipoise of  IGas licences including those awarded in the 13th round it is estimated that IGas’s share of resources to be 2,508 bcf (mid case GIIP).

In December 2008 (revised August 2009) DeGolyger and MacNaughton independently assessed the Company's Net Recoverable Contingent Resource at 821 bcf (3C).  The 1C and 2C Net Recoverable Contingent Resource estimates were 398 bcf and 571 bcf respectively.

Point of Ayr - PEDL 107 and SSPL 1481
The licences at Point of Ayr lie in the vicinity of the town of Prestatyn on the North Wales coast. They consist of onshore licence PEDL107 acquired on 23 January 2007 and the offshore licence SSPL 1481 granted on 17 June 2007. SSPL 1481 consists of the offshore blocks 110/18 (part), 110/19 (part) and 110/23 (part).

Geologically, the area under licence is formed by strata of Carboniferous and Permo-Triassic Age, deformed as an upthrown anticlinal structure, plunging northwards. The area also lies on the south-eastern margin of the East Irish Sea Basin, which produces oil and gas from Triassic sandstone reservoirs in horst blocks and rotated fault blocks, notably from the Morecombe Bay Gas Field, Douglas, Lennox and Hamilton Fields.

For the most part, the onshore outcrop (within PEDL 107) is composed of strata older than the Westphalian coal measures. The coal measures that did exist in PEDL 107 were worked from the pits at Point of Ayr and Mostyn, and gas was found to be highly prolific during mining operations. The coal measures extend a considerable distance out to sea and this was the rationale behind IGas and Nexen applying for the offshore licences. PEDL 107 onshore was acquired to facilitate access to the offshore coals from onshore.

On 26 November 2007, a well was spudded at Mostyn Quay. This assay well was drilled to core and log the coal measures and corroborate existing cores in the area. The rig left site on 15 December 2007 and the well was plugged and abandoned as planned. The drilling of this well satisfied the commitments under the first term of the licence and extended it into its second term.

Equipoise Solutions Ltd, which prepared the competent persons report used in the Net Risked GIIP range above, assessed the Point of Ayr licence areas. The large variation between mid- and high-case shown in the Net Risked GIIP range is primarily a function of how far offshore it is considered feasible to drill, and the potential for considerable upside in coal thickness offshore.

Swallowcroft – PEDL 40-1, 56-1, 78, 115-1 and 115-2
The Swallowcroft area includes licences PEDL 40-1, 56-1, 78, 115-1 and 115-2. The area extends from Newcastle-under-Lyme in the West across to Lichfield in the East, within the county of Staffordshire.

Swallowcroft (PEDLs 040-1 and 056-1): Geologically, the area is formed by a series of open, westward-plunging anticlines and synclines, outcropping rocks of Triassic to Carboniferous Age at surface, with the Carboniferous Westphalian Coal Measures sequence outcropping to the north of the licences, where they were worked as part of the Staffordshire coalfields. A large fault, the Wem Fault, downthrows Carboniferous strata to the very westerly edge of the licences and although quantification of this throw is uncertain, it is likely that the Carboniferous strata to the west of this fault are too deep for CBM exploration at present.

Greater Swallowcroft (PEDLs 78-1 and 115-1, 115-2): Geologically, the area under licence is formed by strata of Carboniferous and Permo-Triassic Age. Solid geological maps show the area to be generally dipping from south to north, with a complex of north-south trending normal faults, commonly downthrowing to the east in the case of PEDL 78-1 and to the west in the case of PEDL 115-1 and 2.

Extensive work has now been undertaken to select appropriate sites from which to drill, using the Group’s existing geological data. On 31 July 2008, a well was spudded at Willoughbridge in PEDL 78. This assay well was drilled to core and log the coal measures and extend our knowledge of the coal seam development in the area. The well successfully achieved its objectives and, as planned, the well was plugged and abandoned in early September. The drilling of this well satisfies the commitments under the first term of the licence and extends it into its second term. A well was spudded at Fradley in October 2008 and the fulfilled the licence obligations for PEDL 115-2 and ensures the extension of the licence into its second term.

In PEDL 56-1, an agreement has been struck with a large employer and land owner who will also be a customer for gas produced from this site; and will give planning support for a well site within this licence.

Four Oaks – PEDL 145 / PEDL 116
This area is located both north and south of the Mersey, between Liverpool and Warrington. The area is made up of two licences, PEDL 145 and PEDL 116.

Geologically, the area under licence is formed by strata of Carboniferous and Permo-Triassic Age, gently dipping to the south and south-east. The British Geological Society maps show that these strata are cut by a number of north-south striking normal faults, throwing to the east and west, creating a number of normal fault blocks and horsts. The Carboniferous Westphalian coal measures sequence outcrops to the north of the licences and were the principal coal measures exploited in the Lancashire coalfields. The dip of the strata places the Westphalian at depths greater than 6,500 feet to the very south of the licence. This depth has been adopted as the maximum depth for CBM exploitation in the independent GIIP estimates.

Activity in the area has been concentrated at Doe Green, a drill site located between Warrington and Widnes between the A562 and the Liverpool-to-Manchester railway line. Two wells were drilled at this site in the last quarter of 2006: one was extensively cored and logged, and a lateral leg was drilled from the other. In 2007, this well was successfully dewatered and put on long-term production test. This leg continuously produced good quality gas to surface. In January 2008, an additional, longer lateral leg was drilled into the same well as the previous lateral.

A connection agreement has been obtained with the local electricity grid to allow the venture to export electricity from the site. In addition, this area has the benefit of planning permission for two more wells with laterals at another location within PEDL 145. This site would also allow export of the gas directly to a customer.

The first licence term on PEDL 116 was extended by BERR to 30 November 2008. On 15 April 2008, an assay well was spudded at Fox Hill Farm. The well achieved its objective to both core and log the coal sequence, and has been plugged and abandoned. The drilling of this well has satisfied the commitments under the first term of the licence and extended it into its second term with an expiry date of 30 November 2013.

Parkside – PEDL 193
This area is located in South Lancashire, to the Southeast of the old Parkside Colliery area of the South Lancashire coalfields and Northeast of Warrington. The area was awarded to a partnership of Nexen and IGas as part of the 13th round onshore licenses announced by the Secretary of State on 28 May 2008.

Geologically, the licence is on the southern margin of the Rossendale anticline and on the western margin of the Pennine Axis, and targets the unworked Coal Bed Methane (CBM) potential of the southern extension of the South Lancashire coalfield which is proven, by prior NCB boreholes, to extend for at least 5 km to the south east.

The oldest rocks present in the area belong to the upper part of the Millstone Grit Series of Upper Carboniferous age and are followed conformably by the Lower and Middle Coal Measures. These geologic strata consist of alternating shales, sandstones and coal seams. The northern and western area of the licence includes part of the underground workings of the abandoned South Lancashire Coalfield. The workings demonstrate the presence of multiple thick (>1m) coal seams within the Upper Carboniferous, Westphalian, Pennine Coal Measures. Exploration work carried out by the former NCB confirms the regional structure of the Coal Measures as gently dipping to the south (at depths up to and exceeding 1,200m) and being broken up by a series of normal faults.

It is the intention of the partnership to confirm the CBM production potential of the licence by drilling a well into the application area from an onshore surface location, contingent upon achieving the required Planning Permission. Idenfication of potential well sites is ongoing.

North Dee – PEDL 184 / PEDL 190
PEDL 184 and PEDL 190 are located in North Dee, incorporating the areas around Ellesmere Port and Runcorn. The area extends between the tidal estuary of the Dee and the Mersey, with the peninsula of the Wirral (Cheshire) lying between them. The area was awarded to a partnership of Nexen and IGas as part of the 13th round onshore licenses announced by the Secretary of State on 28 May 2008.

These licenses target the unworked Coal Bed Methane (CBM) potential of the Eastern extension of the North Wales Coalfields and the South western extension of the Lancashire Coalfields. These coals are proven to extend eastwards for at least 20 kilometres in the North Dee area from Buckley to Chester, and southwards from the Wirral to Wrexham.

The licence area lies on the south eastern margin of the East Irish Sea Basin and on the north western margin of the Permo-Triassic Cheshire basin, forming part of the larger Pennine Coal Measures Basin. The Westphalian Pennine Coal Measures Group of the Pennine Basin extends at outcrop or at subcrop across Northern England, to the West and East of the Pennines, Central England and North Wales. The license area forms part of the South westerly edge of this basin.

South western area of PEDL 190 includes the Collinge Borehole drilled by the National Coal Board as part of an old coalfield exploration program. The Collinge borehole demonstrates the presence of multiple thick (>1m) coal seams within the Upper Carboniferous, Westphalian. A National Coal Board depth structure map confirms the regional structure of the Coal Measures as dipping gently to the south east toward the Cheshire Basin.

It is the intention of the partnership to confirm the CBM production potential of each license by drilling a well into each PEDL from an onshore surface location, contingent upon achieving the required planning permission. Identification of potential well sites is ongoing.

Drax – PEDL 92-1
The Drax area is located in Yorkshire, around 15 miles south and east of York itself. The licence is PEDL 92-1.

Geologically, the area under licence is formed by strata of Carboniferous and Permo-Triassic Age, gently dipping to the south and south-east. Prior mining to the South and West of the area focused on Westphalian B coals, which, from the available borehole data, are at depths of approximately 200m to 1000m below surface within PEDL 92. Although the area had been licensed historically for CBM exploration, no boreholes had been drilled on the licence for this purpose prior to IGas acquiring the acreage.

A well was spudded at Mill Farm on 27 August 2007 and drilled to a depth of 2,718 feet. This well was used to log and core the coal sequence. The rig left site on 14 September 2007, and the well was plugged and abandoned as planned. The drilling of this well fulfils the licence commitments in the first term and the licence is now in its second term.

Equipoise Solutions Ltd, which prepared the competent persons report used in the Net Risked GIIP range above, assessed PEDL 92.

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