Got Gas: Taroom Trough stepping out of the shadows
Energy
Energy
Welcome to Got Gas, where Stockhead senior energy journalist Bevis Yeo gives you the lowdown on the news and insights you need to know in the ASX energy sector.
The past fortnight has been a busy one for the Australian gas sector with Mineral Resources’ (ASX:MIN) binding agreement to sell the Lockyer gas and Erregulla oil discoveries to Hancock Prospecting for up to $1.1bn dominating the headlines.
There’s no doubt that represents a great return on investment for the diversified miner, with Jarden saying that just the upfront payment of $804m alone doubles its $400m valuation for those assets.
However, the impact of the sale on gas resources is strictly limited to the much smaller Western Australia market, which is isolated from the rest of Australia.
The east coast faces a more critical need to secure gas supplies, and investors are increasing turning to that market for the next big thing.
Speaking to Stockhead, MST head of energy research Saul Kavonic said that the Taroom Trough within the southern Bowen Basin, Queensland, which had been flying under the radar until recently, is now gaining momentum on the eastern seaboard.
“The Taroom Trough presents the main gas exploration play to watch in Australia over the next year. It is the only play with the potential to add multi Tcf (trillion cubic feet) of new gas supply to the east coast, that is located near existing infrastructure,” he said.
“Shell appears to have flowed a well nearby, and the market will watch the upcoming horizontal well flow test by Omega, alongside the next wells by Elixir and Shell, with great interest.”
The supermajor holds its cards close to its proverbial chest but the flaring was reportedly observed from the well it drilled, a sign that gas is flowing, though no details are available.
What’s likely more interesting for Australian investors is the news out from the two ASX listed companies operating in the region.
Omega Oil & Gas (ASX:OMA) earlier this month announced that its Canyon-1H horizontal well had recorded strong gas shows and indications of condensate throughout the 822m long horizontal section of the targeted Permian Canyon sandstone.
This is more than ample for the company to test the productivity of the reservoir with managing director Trevor Brown noting that up to nine frac stages could be carried out in the section.
Fracture stimulation work – which involves pumping frac fluids and proppant to create fractures in the target sandstone to enable gas to flow – and flowback testing of the resulting gas flow is expected to begin in Q1 2025.
Adding interest, the well proved that horizontal drilling technology can be applied efficiently in the Taroom Trough.
Meanwhile, Elixir Energy (ASX:EXR) proved that the setback it suffered earlier this month when its Daydream-2 vertical well flowed gas at rates below breakeven rates won’t keep it from progressing its Grandis project in the Taroom Trough.
The company had blamed the poor gas flows on condensate or water banking immediately around the wellbore, which was in turn caused by the multiple open and closures of the well during recent operations, or by adverse reactions to fluids introduced into the wellbore.
AGI Development Group, a part of the Australian Gas Infrastructure Group (AGIG), clearly agreed enough with the company to execute a memorandum of understanding outlining the framework to investigate the potential development of gas infrastructure assets to support possible future production of gas from the project.
This includes a new gas transmission pipeline to the Wallumbilla Hub, processing and compression facilities, and gas storage facilities.
Stepping out of the Taroom Trough, but still within the Bowen Basin, Comet Ridge (ASX:COI) has completed the initial Mahalo East-1 vertical well – the first of two wells that make up its Mahalo East pilot.
Encouragingly enough for the company, the well intersected 7.2m of net coal with higher than expected permeability in the lower two seams with gas observed to be bubbling from the recovered core samples.
A full set of wellbore geophysical logs were also obtained and four short wireline conveyed flow tests were conducted – one across each of the four coal seams intersected.
Drilling of the Mahalo East-2 well is underway to intersect Mahalo East-1 before continuing on its path to the northwest where different steering technologies will be trialled to determine the total length of the lateral well from operational considerations.
Costs are supported by the Queensland Government’s Frontier Gas Exploration Grants Program, which awarded COI a $5m funding allocation.
This fortnight also saw first gas flowing from Beach Energy’s (ASX:BPT) Thylacine West field in the offshore Otway Basin.
However, while the wells will provide a material increase in well deliverability for the Otway gas plant and provide a new source of gas for the East Coast, it isn’t anywhere enough to offset the expected shortfall between supply and demand.
At Stockhead, we tell it like it is. While Comet Ridge and Omega Oil and Gas are Stockhead advertisers, they did not sponsor this article.