It is with much pride that I deliver my first report as Chief Executive Officer of Buru Energy.
My positive impressions of the business prior to taking on the role have been reinforced by what I have observed since my formal start – that is, your Company has great core energy assets well located for cost effective gas and oil exploration, development and production.
It also has credible exposure to energy transition business development opportunities via its wholly owned new energy subsidiaries; and the right team, skill-set and proprietary knowledge to integrate this diverse and exciting portfolio to generate shareholder value.
Our core business – gas and oil exploration, development and production
The last 12 months has seen Buru Energy make substantial progress on its strategy to become a premier Australian diversified energy company. Central to this strategy is natural gas, which is expected to play a pivotal role for decades as a balancer of energy transition and energy security, both domestically and internationally. With global primary energy demand expected to rise by 22% by 20501, natural gas is expected to increase its share in the energy mix, a partner of variable and intermittent renewables, and as a key ingredient in the production of petrochemicals and in particular in fertiliser production that is essential for the food security of the growing global population.
In light of this demand, the Company is aggressively pursuing the commercialisation of its operated, conventional gas and condensate discovery at Rafael 1 in the onshore Canning Basin of Western Australia, as well as the maturation of its prospect and lead inventory across its vast operated exploration tenement holdings in the Basin and world class endowment of tight gas resources.
The Rafael discovery was made in February 2022, and has been independently assessed to have the potential to hold gross recoverable volumes of over one TCF of gas and 20 million barrels of condensate, creating optionality for project development to support direct and feedstock uses of natural gas and condensate for both domestic and international markets. Engineering studies are underway to fully quantify the technical and commercial product-to-market options for this gas.
Looking ahead, planning for field operations are well advanced to support a structured appraisal program to delineate this potentially significant onshore gas and condensate resource, with a 3D seismic survey over the Rafael structure targeted for mid-2023 and appraisal drilling planned for 2024.
Our operations in the Canning Basin also included oil production from the Ungani Oilfield which continued to provide a stable revenue stream with approximately 95,000 barrels (net to Buru) of oil produced during the year. Unfortunately, production had to be suspended on 5 January 2023 due to the impact of ex-Tropical Cyclone Ellie on the Kimberley road infrastructure used for export of our oil, with the forward production plan under assessment at time of writing, pending the reinstatement of critical road infrastructure required for product transport.
The year also saw significant progress in expanding the Company’s footprint and exploration licence areas outside of the Canning Basin as part of its longer term plan to apply the Company’s deep understanding of the geology of the Canning Basin to similar underexplored areas onshore Australia. In July 2022, Buru Energy in joint venture with Mineral Resources Limited, was awarded EP 510, a strategically located exploration permit in the onshore Carnarvon Basin of Western Australia. The onshore Carnarvon Basin is underexplored and prospective for both gas and oil, and adjacent to the Tubridgi gas storage field, the Wheatstone LNG gas processing plant, and associated pipeline infrastructure. Work is underway to prepare for a two well exploration drilling campaign in 2024, for which Buru Energy is fully carried by Mineral Resources Limited as operator. In January 2023 the Company has also been offered two additional exploration areas in partnership with Mineral Resources Limited in the Northern Carnarvon Basin and the Merlinleigh Sub-basin. The areas lie immediately to the south of the EP 510 permit.
Integrated new energy businesses
Buru Energy has committed to net zero carbon emissions from its current and future gas and oil operations by 2050 and is actively seeking to reduce or offset its Scope 1 and Scope 2 emissions. Further details of the Company’s activities in this regard are set out in its Sustainability Report, that provides a detailed account of the Company’s plans and performance against its Environmental, Social and Governance priorities.
In addition, the Company is leveraging its geological and commercial expertise as an incubator for its integrated energy subsidiaries that are focussed on creating value in energy expansion and transition businesses.
This incubation process will ensure that Buru Energy is an active and innovative part of the transformation of the energy sector and is well placed to generate shareholder value from the rapidly evolving transitional energy economy. The Company continues to review its capital structure to ensure its existing shareholders benefit from the current and future value accretive activities of these wholly owned subsidiaries, whilst attracting investment to support the commercialisation and expansion potential of these businesses.
The areas targeted by the Company as part of its new energy efforts are Carbon Capture and Storage (CCS), natural hydrogen and helium exploration and development, and energy storage mineral exploration. This portfolio recognises that in addition to natural gas and oil, all energy sources and technologies will be required to satisfy the world’s growing energy needs while reducing greenhouse gas emissions.
The GeoVault subsidiary continued to build capability and understanding of the carbon capture and storage potential of Buru Energy’s onshore Canning Basin and Carnarvon Basin holdings. The GeoVault business model not only provides the Company with its own potential carbon dioxide emission reduction/disposal options for its future developments but also a potential solution for third party emitters of carbon dioxide that currently have no line of sight to meeting their respective emissions reduction targets.
The 2H Resources subsidiary, focused on natural hydrogen and helium exploration and development, continued to make good progress toward securing tenure in South Australia where it intends on carrying out exploration activities for naturally occurring hydrogen. In June 2022, 2H Resources was advised by the South Australian Department for Energy that it is the preferred applicant for six exploration licences covering an area approximately the size of Belgium, including two gas storage licence areas. 2H Resources commissioned an independent third-party prospective resource assessment of the natural hydrogen potential of these application areas, the results of which demonstrated the very significant potential of these areas and will inform further planning and commercialisation activities.
Finally, the Battmin subsidiary, focused initially on its demonstration project involved in lead/zinc exploration in the Canning Basin in Joint Venture with Sipa Resources, successfully conducted its maiden drilling program in 2022. The results from the program validated the geological concept that carbonate sections in the Canning Basin are fertile for lead and zinc mineralisation, providing reinforcement that Buru Energy’s extensive knowledge of petroleum systems provide valuable insights to mineral exploration. Following the assay results announced in January 2023, Battmin and Sipa Resources are conducting a detailed review of the results prior to evaluating potential follow up options for exploration in the Basin.
Financial and Corporate
During the year, the Company successfully executed a capital raising via a rights issue to support its Rafael 3D seismic acquisition and testing program, initially planned for 2022. This program was subsequently placed on hold following Origin Energy’s announcement in September 2022 of its intention on strategic grounds to exit upstream exploration activities over time including its joint venture interests with Buru Energy in the Canning Basin.
Origin Energy’s intention to exit introduced uncertainty to the timing and form of the forward appraisal and commercialisation of the Rafael discovery. Subsequent to the reporting period, the Company acquired Origin Energy’s Canning Basin Joint Venture interests, thereby resetting the Rafael development and appraisal process, and paving the way for the commercialisation and monetisation of the Rafael discovery.
As at year end, the Company remains debt free with approximately $18 million in cash. The Company continues to exert control on its discretionary expenditure ahead of what it expects to be a capital intensive and transformative period of growth.
In closing, I would like to extend my appreciation to the Board, the executive team and our staff for not only welcoming me to Buru, but for their unwavering efforts in delivering results for the business. With a robust core gas and oil focussed business and significant exposure to new energy opportunities, your Company is well positioned for growth.
Thomas Z Nador
Chief Executive Officer
27 March 2023