Perth Basin shaping up as competitive gas supply option

It’s no secret there’s plenty of exploration activity going on in Western Australia’s oil and gas rich Perth Basin, but what is starting to become more apparent is just how competitive the resources from this region could be.

Last week Strike Energy (ASX:STX) delivered a 300-petajoule maiden gas reserve for its West Erregulla gas field, and while that is significant in itself, what is really worth paying attention to is the “considerable upside” identified and the quality of the gas in the region.

This reserve was just what was estimated to be hosted in the Kingia Sandstone.

Internationally recognised subsurface consultancy Netherland, Sewell & Associates approximates that a further 128PJ of gross best estimate (2C) contingent resources could be present in the Kingia, High Cliff, and Wagina/Dongara sandstones.

And there is even further potential for up to 155PJ deeper in the Western Flank of the field.

Strike CEO Stuart Nicholls said at the time Strike announced the maiden reserve that “natural gas from the Erregulla region in the Perth Basin is one of the most competitive energy sources in the country, competing on cost, carbon and reliability”.

Meanwhile, Mineral Resources’ (ASX:MIN) announced in early September that it had also made a significant gas discovery in the Perth Basin during the drilling of the Lockyer Deep-1 exploration well it shared with Norwest Energy (ASX:NWE).

The primary target here is also the Kingia Sandstone, which MinRes said demonstrated excellent reservoir quality and significant gas elevations.

Multiple gas production opportunities

The Kingia Sandstone, however, is not the only prolific structure in the Perth Basin that Strike is interested in.

South of the Erregulla field sits Walyering, an existing conventional gas discovery that flowed from multiple zones up to 13.5 million standard cubic feet per day from the targeted Jurassic-age, sandstone reservoirs during testing of the Walyering-1 discovery well.

Strike has a stake in this project, alongside partner Talon Energy (ASX:TPD), and was able to leverage the knowledge it obtained from its work on West Erregulla to de-risk the Walyering project.

“The work done by Strike has enabled past results to be put into perspective and has identified larger lower risk targets,” Talon CEO David Casey told Stockhead.

The partners are gearing up to drill the Walyering-5 well and are targeting an in-place best estimate prospective resource net to Talon of up to 38.7 billion cubic feet of gas and 0.98 million barrels of condensate.

Walyering has already shown evidence it hosts good quality gas.

“Walyering is ideally located with a proven path to market and with CO2 of less than 1%, making it possibly the cheapest gas to produce in the entire basin,” Casey noted.

“Additionally, the high condensate ratio has the potential to further enhance the economics of Walyering.”

Gearing up to drill Walyering-5

Talon and Strike have now completed the site works at Walyering-5 in preparation for the drilling of the well.

The well is being drilled by the same rig that drilled Strike’s headline grabbing West Erregulla discovery and is currently drilling MinRes’ and Norwest’s Lockyer Deep-1 well 230km to the north.

Once the drill rig has been released from Lockyer Deep-1, Talon expects it will take about two weeks for the rig to mobilise and set up at Walyering-5

“While the delays in the mobilisation of Ensign Rig 970 to Walyering are unavoidable and outside the joint venture operator, Strike Energy’s control, we have used the time to ensure that all contingencies have been considered and that we are fully prepared for the rig’s arrival on site,” Casey explained.

“This is an exciting time for Talon as we prepare to drill our maiden Perth Basin well.

“At the same time, we continue to increase our technical understanding of the Condor Structure, which has the potential to yield significant additional upside in the event of drilling success at Walyering.”

Talon recognised the potential for a significant discovery at Walyering and struck subsequent deals to acquire the Condor prospect and lock in a first right of refusal over the Ocean Hill gas discovery.

The Condor prospect could potentially host up to 10 times the gas resources the company is targeting at Walyering, Talon revealed back in March.

Initial estimates of the recoverable prospective resources indicate the potential for up to 710 billion cubic feet of conventional gas resources, which could make Condor the Perth Basin’s largest untested wet gas structure.

Global gas demand soaring

Europe’s energy crunch has resulted in tightening gas supplies and surging prices forcing desperate buyers like Japan and China to pay hefty premiums for individual cargoes of liquified natural gas, ABC News reported last week.

And Australia is not immune to the supply tightness, which market commentators say is “unprecedented”.

While WA is well supplied in the short term, the Woodside Petroleum (ASX:WPL)-led North West Shelf will prioritise the liquefied natural gas export market post 2023/24 as fields decline.

And Santos (ASX:STO) revealed earlier this year that production at its Reindeer field offshore WA would cease earlier than expected, which is a major concern given that it supplies about 17% of the state’s domestic gas supply.

This has seen a surge in exploration activity in the Perth Basin, which is fast shaping up as Australia’s next major oil and gas hub.

This article was developed in collaboration with Talon Energy, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.