Perth Basin throws Strike another curve ball but it’s… positive?
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It’s another well and another delay to flow testing in the Perth Basin thanks to high reservoir pressures, making it a sure bet that the powers that be at Strike Energy (ASX:STX) might be getting a tad annoyed.
It is certainly a problem, one enough to send shares in the company down nearly 8 per cent yesterday, but it is also very much the kind of problem that you want to have as compared to, say, a dry well or one that’s just full of water.
Rather, the problem here is that there is gas present within the primary target Kingia sandstone at West Erregulla-4. It’s just rather eager to get out and the company doesn’t have the equipment needed to deal with sand being broken off at high velocities from the formation.
This delay will sound familiar to anyone following the company given that abnormally high pressures (though without the sand) were also responsible for West Erregulla-3 being put on ice while the right equipment is sourced.
Minor sanding issues have also been observed in the nearby Waitsia wells operated by Mitsui, though Strike is taking an understandably cautious approach to its own version of the issue.
The company notes that it was still not clear whether the sand is the result of its somewhat ambitious completion work, which saw a thick 75m section of the intersected Kingia sandstone perforated for flow testing (and possibly production) or a friable formation that would require sand control measures.
What the exact issue doesn’t change is the high pressure, which implies that West Erregulla-4 will produce gas and quite possibly a lot of it.
Given that the successful West Erregulla-2 well had flowed gas at a rate of 69 million standard cubic feet per day during testing in October last year, testing of West Erregulla-4 will certainly be enlightening.
Strike has already defined a gross contingent resource of almost 1.2 trillion cubic feet of gas at West Erregulla and a successful test of West Erregulla-4 would go a long way towards the company booking a more certain, economically viable, reserve.
The issues faced at the two wells is also a great learning experience for the company.
Better to learn more about the reservoirs now then to find out about problems after you have committed to an expensive development (*cough* Chinguetti).
Given Strike’s successes to date, it is not hard to see why it has moved to pick up more ground in the Perth Basin or why it has been driving commercialisation options such as its Project Haber urea fertiliser project.
Other players are also keen to discover the riches hidden in the Perth Basin with Norwest Energy (ASX:NWE) and its operating partner Mineral Resources (ASX:MIN) expect to start drilling the Lockyer Deep-1 well later this year.
Lockyer Deep is just 15km east of Waitsia and 15km north of West Erregulla.
It also targets the same Permian Kingia and High Cliff targets at West Erregulla.
Better known for its mining interests, MinRes has been pushing to discover its own gas to meet the power requirements of its mining operations and recently upped its stake in Norwest from 17.35 per cent to 19.88 per cent.