The market reacted enthusiastically on news that Red Emperor Resources has entered into a joint venture coal bed methane (CBM) project in Georgia.

The stock jumped by 18.4% before midday on Monday, as Red Emperor will start technical studies alongside ahead of an initial three or four well pilot project in the Tkibuli-Shaori Coal Field. The project partner is the Georgian Industrial Group, the largest holding company in the country.

The work programme will start in the second half of the year, and gas production and sales from the site is expected to begin within 18 months. While no specific numbers were mentioned, the companies expect the project will yield enough output over the first three years to fund further expansion of the CBM project.

Full development is expected to involve six CBM wells per year, forecast to produce between 0.3 and 0.5m cubic feet per day (mmcf/d) per well, according to a study by Advanced Resources International.

The joint venture will be focusing on areas known to be venting methane and hence has a high probability of success. Financing will be primarily from debt, meaning Red Emperor will not need to commit any significant amount of capital.

JF

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