Prospex Energy PLC, the AIM quoted investment company (AIM:PXEN) focused on European gas and power projects, has announced that its joint venture company Tarba Energía S.L. ("Tarba") has fully approved the budget for well intervention work at its gas to power project at El Romeral in Southern Spain. Tarba is the operator of the plant. Upon success, the well workover has the potential to increase gas production by up to 15,000 cubic metres per day and allow the subsequent start-up of a second generator to double electrical output.
· Gross budget of €89,000 fully approved by Tarba
· Tarba is in advanced stages of selecting contractors
· Contract awards are expected within two weeks
· Chemicals for the workover have been ordered by Tarba in anticipation of contract awards
· The workover is scheduled for the week commencing 18 October 2021
The Company has a 49.9% interest in the El Romeral gas to power plant through its interest in Tarba, which is the operator of the plant. The gross budget for the well intervention work is €89,000, comprising €65,000 for the well intervention and €24,000 for data acquisition. Tarba is in the advanced stages of selecting contractors for the well workover and data collection campaign and the contracts are expected to be signed over the next two weeks. Services to be provided include the overall maintenance contract, the provision of a slick-line unit and operating personnel and the supply of chemicals (in addition to those ordered by Tarba), including laboratory testing. The well intervention work is planned on one of the suspended wells that is connected by pipeline to the El Romeral power station. This 'Rio Corbones' well was shut-in 2 years after first production in 2014 due to water build up in the well and has been suspended since then pending a workover. Produced water had collected across the production interval preventing gas production and so a low-cost workover has been designed to lift this water from the well which has re-pressurised since it was shut in. The workover will involve the injection of foaming surfactants via the production tubing to create a low-density foam from the gas and water in the well. This will reduce the water that has built up in the tubing and allow the gas to flow to surface. This is a tried and tested workover procedure that has been championed by one of the Company's directors Alasdair Buchanan, who has been working in close conjunction with the Tarba operating team.
The Rio Corbones well workover can be viewed in the context of rising prices for electricity throughout Europe and Spain in particular. When Tarba acquired the El Romeral plant from Naturgy in March 2021, gross income from electricity generation at the plant averaged €60,000 per month, which just covered operating costs. Since then, wholesale electricity prices in Spain have more than trebled and gross income for Tarba has increased accordingly.
Mark Routh Prospex's CEO commented:
"This well workover plan is a perfect example of the ongoing strong collaboration we have in Spain. Alasdair Buchanan has brought his depth of knowledge and experience to propose and help design a low cost, tried and tested well intervention project with the aim of increasing our income from electricity generation at the El Romeral power plant. With electricity prices currently at an all-time high, this well workover, if successful, will provide a return on investment measured in months, if not weeks."
"Wholesale electricity prices in Spain hit €180/MWh last week. In context, for the 12 months to May 2021 wholesale electricity prices averaged €50/MWh. Gross income for Tarba at El Romeral has exceeded €130,000 per month for the past two months and is expected to exceed €184,000 in September, a very welcome increase."
This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR") and is disclosed in accordance with the Company's obligations under Article 17 of MAR.