Galilee Energy Limited (ASX: GLL) ('Galilee') is pleased to provide an update on the Glenaras Gas Project in the Galilee Basin in Queensland.

The Glenaras Gas Project ('Project') is located in ATP 2019, which is 100% owned and operated by Galilee. The Permit covers an area of approximately 3,200 km2 .

The Project has one of the largest contingent gas resources on the east coast and is strongly positioned to supply the AEMO's forecast eastern Australian domestic market gas shortfall in the early 2020's. The Project's independently derived and certified Contingent Resource within the Betts Creek coals are 1C of 308 PJ, 2C of 2,508 PJ and 3C of 5,314 PJ, which represents sufficient gas supply to fulfil 25% of eastern Australian domestic market needs for over 30 years (3C Contingent Resource at 650 PJ/year).

Glenaras Pilot Enhancement Programme

Following on from the results of the Glenaras 17A observation well and the Schlumberger reservoir simulation study, an additional five new vertical wells were drilled safely, on time and within budget. The objective of these additional wells was to enhance the reservoir pressure drawdown to accelerate the onset of gas production. Each of the five new vertical wells and the existing observation well at the Pilot are now on continuous production and the total water rate from the full Pilot is 14,600 BWPD.

Water rates from the lateral wells have declined a further 20% since the first of the new wells was commissioned and this production decline is a clear indication of pressure depletion in the central area of the Pilot. The water rates from the additional six wells are exceeding the estimated rates from the recent Schlumberger reservoir modelling which augurs well for achieving the Pilot's intended objective of accelerating the depressurisation process and achieving commercial gas flow rates. The gas rate at the Pilot remains steady at the previous reported rates. However, we are expecting an increase in this rate in the coming weeks/months as we lower the reservoir pressure within the Pilot area below the critical desorption pressure. We will keep the market informed. Despite the high rainfall experienced in the region over the past month, all necessary action has been taken to ensure continuity of operations with no interruption to Pilot production experienced to date.

Glenaras Water Management Project

Significant progress has been made with the Glenaras irrigation trial, with the centre pivot irrigation system now fully operational and utilizing produced water with no treatment required due to the high quality of the water. The forage sorghum crop was planted in mid-October with the first crop having been cut for hay production in the past week. This is aimed at providing significant assistance to landholders for livestock management and importantly provides proof of concept of a scalable, low-cost solution for produced water at the Project. Site construction of the 2 ML/d reverse osmosis water treatment plant is complete and commissioning of the plant has commenced. This treated water will be available for utilisation in the managed aquifer recharge project which was recently approved by Queensland Department of Environment and Science.

Heads of Agreement signed with Sunshot Energy

Galilee entered into a Heads of Agreement (HOA) with Sunshot Energy to work together exclusively with respect to a number of opportunities associated with the proposed Barcaldine Renewable Energy Zone ('Zone'). Primarily the HOA provides an additional further commercialisation option for the pilot gas produced at the Glenaras Gas Project, this is in addition to our existing power generation options with Clarke Energy. In addition to the supply of gas for peak power requirements at Barcaldine, other opportunities to be explored include securing Commonwealth Government Northern Australia Infrastructure Facility (NAIF) funding for the Glenaras to Barcaldine pipeline as well as power station infrastructure.

These opportunities would provide multiple benefits, including early cashflow and proof of concept for our 1st phase development, which is necessary prior to progressing to final investment decision (FID) on the Jemena pipeline for the full field Glenaras development. Galilee will explore a number of options through the Zone partnership, including carbon capture and storage and substitution of Zone hydrogen in future gas pipelines.

Galilee Managing Director Peter Lansom explained, 'The Barcaldine Renewable Energy Zone is an exciting project creating 200 local jobs and attracting up to $500 million of new investment to the central-west communities and the Glenaras Project is superbly located only 80 km away. The Zone project has support across local council, state and federal government levels and this provides Galilee with a further option to monetise our initial gas supply in addition to our other existing gas sales options. There will also be important environmental advantages through the beneficial use of pilot production gas and produced water as well as flexibility to ultimately send power to and draw power from the grid'.

About Sunshot Energy

Sunshot Energy and sister company ZEN Energy deliver integrated energy solutions combining onsite renewable energy hardware with renewables backed energy supply contracts, delivering affordable, reliable zero carbon electricity to large energy users. The availability of highly competitive zero carbon wholesale electricity from Sunshot Energy enables ZEN Energy (retail) to increase competition in the energy market and lower costs through use of renewable energy. Leading economist Ross Garnaut is the Chairman of Sunshot Energy, with ZEN Energy taken under ownership of Sunshot Energy in August 2020.

PCAs 314 and 315 have been awarded for 15 years and 10 years respectively. The award of these two PCAs is a key step towards commercialisation of the Glenaras Gas Project as it is a clear acknowledgement by the Queensland Government of the considerable certified Contingent Resource and provides Galilee the required time to mature the resources to Reserves and produce gas to market. The combined areal footprint of the PCAs is in excess of 3,200km2 , which rivals in areal size, the prolific Spring Gully/Fairview coal seam gas fields and the combined Undulla Nose coal seam gas fields in the Bowen and Surat Basins respectively.

Springsure Gas Project (ATP2050) - GLL 100%

Seismic Reprocessing Update

Over 696km of 2D seismic data has been reprocessed in and around ATP 2050 and integrated with an additional 900km of 2D data in order to produce contemporary time and depth maps of the key Permian geological horizons in the permit.

Exploration focus is now being placed on the multiple conventional gas prospects and leads that have been identified through the reprocessing and remapping. The improved visualisation of the subsurface structure and stratigraphy has confirmed several potential gas-bearing structures which are highly prospective and analogous to the adjacent Northern Denison gas fields of Springton-Arcturus, Yandina and Turkey Creek. These prospects and leads will now be further assessed and matured towards readiness for either drilling and/or acquisition of additional seismic at a future date.

Kumbarilla Project (ATP2043) - GLL 100%

QGC and Galilee have now jointly executed the data swap agreement for exchange of the data acquired in the Kumbarilla drilling campaign for the pilot production data in the adjacent PL 1009 held by QGC.

Corporate

The cash flow for the Quarter is presented in the accompanying Appendix 5B (quarterly Cashflow Report). The Company continues to maintain a very strong cash position at 31 December 2020 of $23.8 million, with no debt. Galilee successfully completed a placement in the quarter to institutional and sophisticated investors to raise approximately $15 million before costs ('Placement'). The Company entered into placement subscription agreements with a number of institutions and sophisticated investors for the issue of 23,809,524 Placement shares at an issue price of $0.63 per share, representing a 9.4% discount to the 5-day VWAP of $0.696 per share and an 11.9% discount to Galilee's last closing price of A$0.715 per share as at Monday, 9 November 2020.

The strong demand for the Placement demonstrated growing momentum in the strength of the east coast gas market and is a strong endorsement of the Glenaras Gas Project and Galilee's strategy of becoming a significant gas supplier into the east coast gas market. During the period, the Company spent $8.2 million on exploration and evaluation activities, primarily on the Glenaras vertical drilling programme, Glenaras water management projects and Pilot operating activities. The Company's Annual General Meeting was held on 24 November 2020, at which all resolutions were passed. Galilee's accompanying Appendix 5B includes an amount in item 6.1 which constitutes directors' fees paid in the December quarter.

Contact:

Tel: +61 (0) 7 3177 9970

About Galilee

Galilee Energy is focused on creating a high value exploration and production company building on its core strengths in coal seam gas appraisal and development. Its primary area of focus is Queensland where it is appraising the Galilee Basin and exploring in the Surat and Bowen Basins whilst looking to add further high quality acreage to its portfolio.

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