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Wednesday, 1 June 2011 James McGrath

Tuesday, 20 September 2011

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The Cooper Basin: From blobs to behemoths

THE year was 1963, and Santos didnt particularly feel like drilling the gamechanging Gidgealpa-2 well in the Cooper Basin.
At that point, success in the basin had been slight at best. Minimal surveying had been done, with the work that was undertaken reinforcing a long-held belief that the Cooper Basin was dry as a bone. In fact, one of the best pieces of evidence before that point that the Cooper Basin held hydrocarbons was brought into the South Australian Department of Mines in 1934. It was a sample of water brought in by a boring contractor from a borehole about 54 metres deep on Wilkatana Station. Tiny blobs of oil were present on the surface of the water. Promising, but only 1.2 grams of oil were taken from the sample. Santos was borne out of the association between JL Bonython and RF Bristowe in 1954, with the latter holding a conviction about the Cooper Basin holding hydrocarbons based on his experience observing the oil-bearing zones of Iran and Russia while employed as a Kings manager. They pooled their ideas together with Reg Sprigg, and Santos was floated in 1955. RELATED COMPANIES Seismic and geological work in the coming years would prove promising for the area, but it was only that. There was nothing concrete to suggest the massive resource in the basin. In August 1963 though, that was about to change. While Santos drilled the first petroleum exploration well in the basin at Innamincka in 1959 the SantosDelhi JV drilled the Gidgealpa-1 well, which intersected a thick Permian section with several sands with good reservoir characteristics. However, although the Permian sands showed gas, it was so badly washed out and caved in that it couldnt be tested. The South Australian governments eagerness to plough on showed through, as it insisted that the sands be tested again at any cost on the same structure. While gas was the JVs secondary target, the 2 million cubic feet per day Gidgealpa-2 discovery signalled the start of a rush to get into the Cooper Basin, with licenses for oil and gas exploration covering almost the whole state by the mid-1960s. What happened next This frenzied exploration included the discovery of natural gas at Moomba-1, near the site which would host the Moomba Gas Plant, which was built along with a 750 kilometre pipeline to Adelaide in 1969. Eventually, gas exploration in the Cooper Basin would see more than 5000km of seismic and 20 exploration wells drilled in 1970. The new discoveries paved the way for the export of gas, and a pipeline to Sydney at Moomba was completed in 1976. But all good things, as they say, must come to come to an end, and by the mid-70s there was a whisper that the gas fields that would supply two national markets and attract a huge number of explorers couldnt last forever. Cameron G2 Spool Treemore SANTOS LIMITED [STO] BEACH ENERGY LIMITED [BPT] Industry Search
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Combined with commercial oil discoveries in the late 1970s and a $1.5 billion liquids project in the late 80s, gas wasnt proving to be the in-demand Cooper commodity it once was. A recent report commissioned by the Energy Supply Association of Australia said Cooper gas reserves are expected to decline in the period leading up to 2020 while doomsayers predict an end to the Cooper bandwagon before that date. However, the reserves dont include the unconventional potential of the basin. An unconventional solution A recent report by the US Energy Information Agency said Australia was sitting on the world's fifth-largest reserves of shale gas and was ready to become a major producer. With LNG exports an increasingly attractive option and long-term deals to Asia on the table, Australia has an increasing need to source gas from both conventional and unconventional targets. Santos is looking to feed its Gladstone LNG plant with a $200 million unconventional drilling campaign while Beach Energy and a host of other players including Senex Energy are looking to fund the first wave of unconventional gas discoveries in the basin. Beach said earlier this year that the Nappamerri Trough shale, which runs beneath its PEL 218 license, holds potential gas in place of more 200 trillion cubic feet, and holds properties similar to the Haynesville US shale play. The real potential game-changing moment will come early next year, when Beach drills a pilot well targeting the shale zone. For now, Beach is talking up the potential of the resource in the Cooper Bain. While Beach managing director Reg Nelson thinks conventional targets will continue to provide value for the basin, he said unconventional targets, especially shale, will play a larger role in the future. I think the two will go hand in hand. To begin with, the development of the existing conventional gas resource will feed the consumer base over the next ten years or so or more, and thats largely with infill drilling, Nelson told EnergyNewsPremium. Elsewhere in the Cooper I think the future potential of shale gas areas and the non-core shale areas, tight gas will all form the suite of so-called unconventional gas. I still think theres potential for new discoveries of conventional gas in the Cooperall of these things will go in parallel, and I think the Cooper is set to become the swing producer for the domestic market and for LNG export and even for uses like gas to liquids. It was only by looking toward the US shale explosion, and in particular the Haynesville shale play, that Beach started to shore up its shale position in the basin. We started to look seriously at shale and shale potential in Australia in late 2007. We had established a position in the coal seam gas industry but I was aware shale gas was overtaking coal seam gas in the US and we drilled a well in the Otway Basin which leaked gas from fractures in the shale so that really kindled our interest, Nelson said. Our technical team then worked to find all of the shale basins in Australia and while the Otway was certainly of interest they came back and said Look, the Napamerri trough in the Cooper is probably the most similar to the Haynesville and well worth pursuing, so it led off from there. The time is right for shale Unlike other shale prospects in Australia, the Cooper Basin has existing infrastructure which improves the economics of shale development dramatically. Theres established infrastructure plus we already have market penetration with existing customers so theres a whole bunch of things we can leverage off, Nelson said. He added if a shale gas find was found in the middle of the Officer Basin, where theres relatively little infrastructure, it would change the economics of the discovery dramatically. He also noted the technology and improving internal rates of return would make the shale gamble one worth taking in the Cooper Basin. I think interest is picking up as theres a better understanding of here. A lot of people make a lot of cynical remarks about shale without having looked at Subscribe | Advertise FREE TRIAL! Subscribe | Advertise FREE TRIAL!

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the economics, the cost production and improved performance in the Haynesville, he said. While Beach and others position themselves to unlock the shale potential of the Cooper Basin against a background of cynicism and doubt, its worth taking a look back at the history books to see patterns emerging. The Cooper has rewarded those in the oil and gas game willing to take a punt. Reg Sprigg, Santos and Beach have all become names in the petroleum industry because of their involvement in an area where the evidence of oil and gas potential was slight. After all, one of the more compelling pieces of evidence that the Cooper Basin would become a prolific producer was a few blobs of oil.

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