Pavo oil find is a hint of more to come at the Bedout Sub-basin

Pavo oil discovery is timely given current volatility
Find to be tied back to the proposed Dorado oil development
Other targets in the Bedout Sub-basin are now more prospective

With the increasing likelihood that the high oil price environment is likely to stay, the Pavo oil discovery by Santos (ASX:STO) and Carnarvon Energy (ASX:CVN) couldn’t have come at a better time.

The Pavo-1 well in the shallow waters of the Bedout Sub-basin, offshore Western Australia, intersected 46m of net oil pay with excellent reservoir quality similar to that encountered in the Dorado oil field about 46km to the west.

Best estimate (2C) contingent resources for the northern culmination of the greater Pavo structure – where the Pavo-1 well is located – has been assessed at about 43 million barrels of oil.

This is likely to support a low cost tie-back to the first phase of the proposed Dorado oil development with Santos managing director Kevin Gallagher flagging a very attractive breakeven cost of just US$10 per barrel.

“With the global oil and gas markets seeing increased volatility, low-CO2 oil and gas resources at Dorado and Pavo add significantly to Australia’s national energy security,” he added.

Phase 1 development of Dorado is targeting initial oil production of between 75,000 and 100,000 barrels of oil per day starting from 2026.

Gas from the field will be reinjected into the reservoir for future production under the second phase, which is still very much in the concept phase.

Success hints at more oil to come

While this is a successful outcome by almost any measure, the real value of the Pavo-1 oil discovery could be how it unlocks even more potential.

Its success serves to significantly de-risk the hydrocarbon bearing potential of the separate southern culmination of the greater Pavo structure, which has a probability of geologic success of about 60% for the best estimate prospective resource of 40MMbbl.

It also bodes well for the upcoming Apus-1 exploration well that the two companies expect to spud in April.

More importantly, the Pavo-1 result also increases the likelihood that the petroleum system in the Bedout Sub-basin is commercial over a greater area, which de-risks several other low-cost opportunities in the area.

Santos will now drill the well to its planned total depth of 4,200m to intersect the Early Triassic and Upper Permian stratigraphy that has not previously been drilled in the Bedout.

Carnarvon, which holds 30% of the WA-438-P exploration permit, said that while it does not expect these deeper sections to host commercial results, they are expected to be relevant to assessing the potential for prospects within that stratigraphic section nearby and across the basin.