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Interview

with Ian Halstead, CEO, Planet Gas

15.04.2011 / Energyboardroom

You are relatively new to the CEO position having commenced in October 2010. How does your professional trajectory align with the direction of the company to make for a good fit?

Planet Gas has been in existence since 2003. The Company historically had entered the coal bed methane (CBM) space in the USA, and more recently our previous managing director, the late Sharif Oussa, who tragically died last year, had been putting together a portfolio of unconventional assets.

Unfortunately, towards the end of 2009 a lack of progress at Copenhagen and the Labor government’s decision to postpone carbon trading legislation diminished the market’s interest in geothermal.

We have been therefore rationalising the geothermal portfolio, whilst repositioning the Company for growth in the CBM (Sydney and Gunnedah Basins) and Conventional Oil and Gas (Cooper Basin) sectors.

I originally joined the company in July 2010 as chief operating officer. The recruitment strategy for the position had been based around locating an individual with an operations background in oil and gas to fit the needs of upcoming operations on the CBM and Conventional Oil and Gas assets. I brought with me small and medium size company experience, a good fit for Planet’s requirements. Much of my career has been spent identifying and crystallising opportunities, and assembling teams to evaluate and exploit those opportunities. I accepted the post as CEO after the untimely demise of our previous CEO.

Planet’s assets are well addressed and very prospective. The CBM licenses (part of a farmin agreement to earn equity with Leichhardt Resources Pty Ltd) are optimally located in the Sydney and Gunnedah Basins close to existing CBM projects and/or discoveries. New South Wales currently imports some 7% of its energy requirements and consumes about 27% of Australia’s total energy. There are projected to be another 12-14 gas fired power plants constructed between now and 2016. In addition large scale LNG projects in Queensland will consume much of the Gas produced in the Eastern half of Australia , leaving a potential defecit in the domestic market in NSW. Planet is targetting that defecit.

Planet’s Cooper Basin block is also well addressed. It is surrounded by existing oil and gas fields and under-utilised pipeline infrastructure. In general the Cooper Basin still has some untapped potential, state-of-the-art oil and gas exploitation technology has not been extensively used. I believe that there is yet a niche for horizontal wells and multistage fracturing there, which may lead to significant increases in production. I draw your attention to the West Texas analogues where there have been significant production increases from existing fields through use of these techniques.

Our block in the Cooper also contains significant thicknesses of coals, albeit at depths greater than 2500m. High amounts of formation gas were recorded during the drilling of these Coals on adjacent Petroleum wells. As part of our exploration programmes we will be coring those coals to see if there is another potential resource.

Additionally there is gas shale potential. We will be conducting studies on the prospectivity of those shales as we collect samples during our exploration well drilling programmes to better understand that potential.

You were brought in as COO and then CEO with the specific task of leveraging your international experience to grow this company. Having worked around the world and now charged with growing Planet Gas in a very diversified Australian hydrocarbon landscape, what do you assess are the keys for a junior E&P company to succeed here?

Common to any country, for a junior to succeed, it needs to select projects which are relatively low risk and in close proximity to markets and infrastructure. Typically old field rehabilitation or secondary development projects are the niche of smaller companies and can provide avenues for potential significant growth.

Australia is little more difficult. All of the ‘low hanging fruit’ has gone!. In order to succeed here Planet needs an edge. Our edge in CBM is the wealth of experience brought by our Board of Directors in the CBM and Mining sectors. Our edge in the Cooper Basin will be to employ innovative techniques to confirm the existence of the resources and implement early production.

There are two driving forces which dictate end user markets for Australian gas. Domestically, states are increasing targets for the percentage of gas in their energy consumption portfolios. However, voracious demand from abroad fetches attractive gas prices for the export market. The latter trend is only likely to increase given recent events in Japan. Which do you consider to be the overriding trend?

In New South Wales I would imagine that any gas Planet produces will be absorbed into the domestic market simply because of the state’s status as a net importer, and its plans to build additional gas fired power capacity.

The future of nuclear power is now the subject of concern in several countries, after the events in Japan. I believe that Gas fired power will become energy of choice given its ‘clean” nature and modest environmental footprint. Gas is undoubtedly the best option in a world which cannot yet decide if it has gone over the threshold that predicates the use of unconventional and renewable resources.

Still a young company, is Planet Gas ready to be an operator for its permits? What are some of the timetables and upcoming targets you are aiming for with the drill bit?

Yes, we are already an operator. My technical background in operations and company building is precisely why I am here; although we are doing things in a slightly different way by using consultants to project manage. There are two phases to our CBM projects. The first phase is to drill four exploration core holes and run 80km of seismic. It will be a fairly modest exploration project to prove up the presence and thickness of coals and to measure their gas contents. The results of the coring and coal analysis will allow us to calculate contingent resources in those areas.

The next phase of the operation will be to drill as many as five horizontal pilot wells into the coals and go for longer term de-watering to prove up reserves. We expect to commence the next phase in January or February of next year.

We often hear that Australia lacks the supply and modernity of onshore drilling equipment to support exploration campaigns. Do you find yourself at the end of a long waiting list for technology?

As Queensland is a global centre for CBM exploration and development there is much available in terms of personnel and equipment resources. We have not yet encountered any constraints or long waiting lists, albeit that we are at the very early stages of exploration.

Given the early stage of our participation in the Cooper Basin, I am unable to comment on waiting lists, except to say that I understand there is not a great deal of equipment available for horizontal drilling and possible multi stage fracking.

There is also a fairly negative public sentiment towards fracking because of the environmental hazards that various documentaries and movies on the industry have portrayed. Although much of this is the result of sensationalist journalism, I can certainly understand concerns. Planet, however will employ all measures at its disposal to mimimise environmental impacts. As an example we will use an environmentally friendly drilling fluid on our CBM projects to avoid contamination.

Every junior likes to dream big and imagine the company-making discovery. What would it be for Planet Gas?

Each week brings a new idea! Mutinational and major oil and gas companies have deemed certain projects uneconomic in the past, and abandoned them as a result of unfavourable oil prices, extraction difficulties, complicated politics or simply insufficient reserves. These are the projects upon which Planet is focussing.

The key to a junior’s success is careful research in understanding what reserves may be left in the ground which have been bypassed or overlooked. I know areas of the world where entire sections of formation were not even logged by wireline because of the prevailing strategies at the time. Homework and possessing staying power are the keys to small company success.

Are career geologists, like yourself, who head junior E&P companies more prone to over-emphasizing the “staying power” mentality and falling in love with assets, as opposed to a managing director who does not necessarily come from a geological background?

There is no doubt that if you work an area you develop a familiarity and comfort in working in that area. I have seen others who have allowed that association to temper their commercial decisions. I do not put myself in that category.

Look I was born in Yorkshire! We are known for being straight forward and to the point. If I can see that we have fallen below the threshold of commerciality on an asset then its for the chopping block !!

Renewable energy targets are again gaining traction in the political sphere, especially since the new Labor government was elected last year. How does this affect your long-term thinking on your geothermal assets?

We have not yet written off Geothermal completely, but I do think that the tenements that were licensed in areas where there is little known about the subsurface heat flow are very high risk.

Geothermal works in areas of high heat flow, high Geothermal gradients and abundant hot water flow, for example in the Philippines where the water is volcanically heated. One of our geothermal tenements at Innot in Cairns, fits the model of low geological risk, infrastructure presence and market proximity. It also has hot springs at the surface. It is the most interesting in the portfolio.

Shale Gas is still an unknown in Australia. One of our competitors is drilling shale wells in the Cooper Basin and we know that shales exist in our license. Perhaps that will be the next ‘energy wave’ after CBM?

Wind and wave power – we are waiting for the world to decide. Nuclear we have already discussed.

Meanwhile, juniors like Planet Gas continue to discover additional CBM resources. In a world driven by commercial reality it is likely that CBM will continue to be high on the list of energy priorities in Australia.

Planet Gas has had several iterations and new starts, as you mentioned earlier. What is the most recent new start?

The most recent new start would indeed be oil and gas. It is a real change of direction for Planet Gas. The board’s experience in CBM, gold mining, and coal mining combined with my oil and gas background and success in putting projects in place around the world should work very well.

What can we expect from Planet Gas over the next 5-7 years?

Over the next 5-7 years I would like to see this company successfully develop CBM in our three PEL blocks. We are looking to carefully augment additional acreage. All of the low easy acreage is gone so it will inevitably involve innovative deals perhaps in which other players get involved with oil and gas in return for participating with Planet in CBM.

It is also no secret that we have been casting the net a little wider and looking at some international project participation. There are projects in neighbouring Southeast Asian countries which have “company making” potential because of their significant size and relatively low entry costs.

Are there any final messages that you would like to convey to our readers about Planet Gas?

The company is sitting on some well adressed prospective acreage and is in an excellent position for growth.

We will always strive to operate within the environmental and legal frameworks of the States in which we work. We will consult with all stakeholders and communities as necessary and will uphold our stringent business ethics policy. We will keep our environmental footprint to an absolute minimum

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