Also, the related funding arrangements for the facility have been entered into and are presently held in escrow.
The WGSI Facility is being developed utilizing a depleted 40Bcf gas pool in the Upper Mannville Formation with approximately 10Bcf of cushion gas in place.
The storage reservoir is suited for commercial operations due to its proximity to the mainline transportation infrastructure, the low pressure nature of the reservoir, the cushion gas in place and the injection and withdrawal capability of the reservoir.
Nine horizontal injection/withdrawal wells were drilled in the last half of 2009 and the first quarter of 2010 to develop the reservoir for gas storage purposes. Including all drilling and testing, land, facilities and seismic activities, total project expenditures to the end of the first quarter of 2010 were $20m.
WGSI expects to expend an additional $37m during the final three quarters of 2010 related to the purchase and installation of two compressors and associated surface facilities designed to allow for the withdrawal of up to 105MMcf/d beginning as early as November of 2010.
WGSI commenced commercial injection of natural gas in early May of 2010. Initial injections are being limited to 22MMcf/d as reservoir performance is monitored.
WGSI plans to enter into park and loan transactions for up to 8Bcf to 10Bcf of natural gas storage for withdrawal in the period of December 2010 through March 2011 while continuing to monitor reservoir pressures and confirming the injection and withdrawal capabilities of the wells and facility.
The company plans to utilize an estimated 17bcf of storage capacity in 2011 with no additional capital spending.
Funds flow for the WGSI Facility is projected to total $6m for 2010, and is forecast to ramp up to $15m to $20m in 2011, as utilization of the storage capacity is increased.
Upon future expansion of the facility to utilize the full storage capacity of the reservoir, funds flow is expected to exceed $20m annually.
