Igas Energy's reserves could quadruple those of the UK

3rd Jun 2013 10:42

Shale gas producer Igas Energy has this morning revised its estimates of the potential natural gas reserves at its Northwest England license sharply higher. Using 330 kilometres of 2D seismic data and information gathered from 20 offset wells together with its well at Ince Marshes the company now believes that under a 'most likely' scenario the reservoir holds 102.0trn cubic feet (tcf) of 'gas initially in place.'The company's previous estimate had been for a total of "over 9tcf." Even under a successful scenario, with a recovery factor of between 10% to 30% - the average in the United States - that would still come in well ahead of current estimates for the United Kingdom's total proved gas reserves, which now stand at approximately 7tcf, analysts at Jefferies point out.However, the above data is not yet conclusive those same analysts point out. "The range of uncertainty of numerous technical and commercial variables is still very large, not least of which is whether any portion of this in-place potential can flow at commercial rates," they go on to explain. On the basis of their cost and gas price forecasts, a horizontal well must be capable of producing at least 3bn cubic feet to be commercial (earn a 10% real internal rate of return, or IRR).The company will initiate an exploration & appraisal programme in the fourth quarter, with two vertical wells initially, to further refine their 'in-place' estimates and begin to determine if the gas will flow at commercial rates. As of 11:10 shares of Igas Energy are advancing by 8.6% to the 101p mark, having hit an intra-day high at 107.5p. AB