- Junior oil and gas companies hunting for sources of gas amid concerns of declining supplies in the east coast market
- Omega Oil & Gas announces a maiden best estimate (2C) contingent resource of 1.73 trillion cubic feet of gas for its Canyon project in the Taroom Trough
- Potential to host a potential 3Tcf gas play, which could help support east coast gas supply at a critical time
Concerns continue to be rife about the impact of declining supplies – an ongoing theme that seems unlikely to end anytime soon – on the Australian east coast gas market.
This is largely fuelled by ongoing production declines from the ageing gas fields that make up the Gippsland Basin joint venture between ExxonMobil and Woodside Energy (ASX:WDS), which is still the single largest provider of gas to the east despite a 34% decline in supply over a year to mid-September to 55.6 petajoules of gas.
That gas producers on the east coast have between 188 and 237PJs of gas uncontracted gas for sale over the next two years has done little to ease concerns as their disclosures do not include gas already sold under long-term contracts.
For context, east coast domestic gas demand totals about 550PJ per annum.
Given this uncertainty, it is no surprise that junior oil and gas companies have scrambled to find new sources of gas in both existing and new areas such as the Beetaloo Sub-Basin in the Northern Territory and Bowen Basin in Queensland.
Omega’s large gas resource
The latter basin is where Omega Oil & Gas (ASX:OMA) has now announced a maiden best estimate (2C) contingent resource of 1.73 trillion cubic feet of gas – consisting of 1.51Tcf of gas and 68.6 million barrels of condensate for its Canyon gas project in the Taroom Trough.
It follows the success of its two well drill program at the project that had returned thick intercepts of the targeted Kianga formation with overpressured hydrocarbons.
Omega’s resource, which was independently assessed by Internationally recognised consultancy Netherland, Sewell & Associates, was based on a modelled average reservoir thickness of 27m in the Kianga, which is 221m thick at the site of its Canyon-2 well.
Adding further interest, the contingent resource is based on just this section – raising the likelihood of further increases once other hydrocarbon-bearing formations encountered by the two wells are assessed.
This has the potential to host a potential 3Tcf gas play, which could help support east coast gas supply at a critical time when production from coal seam gas wells is forecast to decline.
Canyon also benefits from ready access to an established gas services industry, highly skilled local workforce and pipeline infrastructure that was developed around the CSG sector.
Appraising the Canyon project’s gas production capacity
The company is now planning the ability of the Kianga formation to flow gas and liquids by drilling a horizontal well and subjecting it to a multi-stage hydraulic stimulation program.
A stimulated horizontal well is considered to be necessary to test whether the large volumes of gas contained within the Kianga formation can be delivered at potentially commercial flow rates as stimulated vertical wells in the Taroom Trough have to date delivered sub-commercial flow rates of gas.
This is reflected by the explosive growth in US unconventional oil and gas resources following the shift from vertical to horizontal wells, an evolution which is starting to occur in the Bowen Basin.
Based on the current availability of a suitable drilling rig, the results of the program are currently expected in Q3 2024 with the company expediting the program if rig availability allows.
Special advisor to Omega’s board Trevor Brown told Stockhead that while the company was focused on the horizontal well, it was also planning and preparing for subsequent steps.
He said that the expected testing was constrained by the limited number of rigs in Australia capable of performing this type of work and that Omega was currently in the market for the first suitable rig available.
“We will undertake further appraisal and development activity as quickly as possible following receiving results of the Canyon 1-H program,” Brown added.
Successful test work will also allow the company to convert a portion of the contingent resource into commercial reserves.