As we continue to see the tragic geopolitical situation in Ukraine unfold, commodity markets have been rocked worldwide.
On Monday, the benchmark Dutch TTF natural gas contract shot up 47% to €283.43 per megawatt-hour, representing $522 per barrel of oil equivalent. It is worth noting that Russia accounted for 45% of Europe’s natural gas imports last year.
This parabolic move is already starting to take its toll on the European industry as shutdowns have already commenced as steelmakers across the EU have started halting production due to the costs of energy. Natural gas is used as a feedstock for nitrogen fertilizers, typically accounting for around 80% of a manufacturer’s costs.
With ongoing sanctions against Russia coming from the west, countries are now beginning to prioritize energy independence which is still filled with uncertainty as EU gas storages remain at historically low levels.
NG Energy: (TSX-V: GASX)
A company I have been covering for a while is NG Energy which continues to progress its developments and is nearing natural gas production in Colombia.
For new readers being introduced to the story, the company owns three strong de-risked assets in well-known stable producing areas in the country, close to national infrastructure.
The company is planning to play a vital role in Colombia’s clean energy transition as the country is currently facing decreasing natural gas supply. However, it is expected the country will see a 200% increase in domestic natural gas demand over the next 30 years to help power a cleaner future and help drive economic growth.
I will be doing a thorough editorial piece on NG Energy in the weeks ahead after production is announced to do a deep dive on all three exciting assets and their significant exploration upside, specifically at SINU-9.
Today I am joined by the company CEO, Serafino Iacono, to provide an update on the company:
Alex Deluce:
Hi Serafino, thanks for taking the time to provide Gold Telegraph readers with another update on NG Energy.
Since the last time we spoke, our readership has grown dramatically.
For readers unfamiliar with the NG Energy story, can you provide a brief overview of the companies three exceptional assets?
Serafino Iacono:
Great to be back, Alex. Thank you to you and the Gold Telegraph audience for following our story.
SINU-9 has been on my radar since my days with Pacific and I was very pleased to make the property the cornerstone asset of this company.
The land package spans over 300,000 acres and has exceptionally strong seismic attributes indicating strong presence of gas as well as light oil prospects. We sit directly west of Canacol Energy’s (CNE:TSE) main production block where they have made numerous high profile discoveries over the past year and have annual production of close to 200mmsfd.
We are very excited about the potential of SINU-9, we expect to commence our first phase drill campaign in the coming weeks.
Note from the editor – (“Pacific Days” refers to Pacific Rubiales – a company that Serafino and NG chairman, Ronald Pantin helped develop from 10,000 barrels a day to 350,000 barrels as members of senior management – the company is known today as Frontera Energy.)
The Maria Conchita field is our most advanced block which will commence production in the coming weeks. Maria Conchita neighbors one of the largest natural gas deposits in Colombia, the Chuchupa field, with more than 900 MMboe in reserves and accounting for 40% of Colombia’s daily natural gas output. The Company is in the final stages of completing infrastructure to bring on 16 to 20 million standard cubic feet per day (MMSCFPD) of capacity.
Last but not least, the company has a third asset with true bluesky potential – the Tiburon field. Located on Colombia’s Caribbean coast, in close proximity to one of the most prolific gas blocks in Colombia, Tiburon holds various similarities to the massive offshore Perla and Orca discoveries in Venezuela and Colombia. Due to the size and remoteness of the field the company plans to shoot a seismic survey and look for a farm in partner to develop the block.
Alex Deluce:
With Maria Conchita nearing production, can you touch on the type of production the company expects in 2022 alongside when the company is planning the re-entry at Tinka-1?
Serafino Iacono:
From Maria Conchita, the plant will have capacity up to 20mmscfd with room for an expansion in the future.
Our team is working very hard to complete necessary works and we expect net production of 16 MMSCFPD from Maria Conchita by the end of the quarter after facility testing is complete. We are very excited to reach this significant milestone.
As for Tinka, the company plans to re-enter this well in the second half of 2022.
Alex Deluce:
As many of my readers know, I am exceptionally excited Sinu-9 asset adjacent to Canacol.
Can you provide a brief update there?
Serafino Iacono:
Of course, as part of continuous evaluation of the targets at SINU-9, the company conducted a recent seismic review of Magico-1 and found further evidence of deeper zones with possible higher production expectations. For this reason, we have started the program at Magico-1.
The pad site for the Magico-1X well is being built and the well will be spudded by the end of the month with drill/completion/testing to take around 45 days total.
As mentioned, the block sits directly west of Canacol’s main production field where several high profile discoveries have been made over the past year including Aguas Vivas-1 where Cancaol hit 412 feet of payzone and tested 35mmscfd.
In addition to the prolific gas potential, our geologist has done further work to better understand the light oil potential of the property in the NW zone. Growing natural gas reserves remains a top priority, however, we will further explore the light oil prospects as the potential returns of a very significant column previously encountered when the ANH drilled La X-1 is very encouraging.
Alex Deluce:
Can you touch on the take or pay contracts the company has obtained with gas utilities in the country?
What should investors expect regarding the price the company can sell its gas for?
It must help with these extreme gas prices we see worldwide.
Serafino Iacono:
The company has signed LOIs with two Colombian utility companies for $US5.08 per MCF.
Once testing is complete take or pay contracts will be finalized for the gas produced from the Aruchara-1 well giving investors certainty of cash flow while the Company executes on its exploration program at SINU-9 and further develops Maria Conchita.
Alex Deluce:
Finally, Serafino, can you touch on why gas will serve as a vital transition fuel for Colombia in the years ahead?
Serafino Iacono:
Colombia is in need of clean, reliable power to stimulate economic growth and meet its Paris Agreement emissions target of decreasing emissions by 51% by 2030.
Natural gas emits 50% less greenhouse gas versus coal when used to generate electricity. It supports the integration of variable renewable electricity generation because it can quickly compensate for dips in variable supply and rapidly respond to sudden increases in demand.
However, natural gas reserves have steadily declined over the past decade in Colombia and natural gas production is projected to go from 1.2 BCF per day today to 600 MCF per day over the next 5 years, while demand is projected to rise to 1.6 BCF per day over the same period. That means that in the next 5 years Colombia will need 1 BCF of additional production per day for use in electricity generation, providing heat for essential industrial processes, heating homes and fueling the transport of people and goods.
This presents opportunity for a Company like NG Energy with high quality assets to achieve premium pricing for its natural gas production in the years ahead.
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