The Perth Basin is all gassed up and ready to rumble
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Interest in the Perth Basin is starting to ignite, with exploration activity increasing in the region thanks to growing evidence it has always been a major gas hotspot.
But this state of excitement wasn’t always the case.
Wind the clock back a couple of years and while the Perth Basin was considered to be a proven petroleum province, it just appeared to be the poor relation of other Australian regions such as the giant gas fields to the north or the wildly successful Cooper Basin.
And it wasn’t hard to see why as Warrego Energy (ASX:WGO) managing director Dennis Donald explained that exploration in the region was centred around small deposits of oil — like the offshore Cliff Head oil field that is still producing at a reduced rate to this day — and small deposits of unconventional gas.
“The thing that really catapulted the Perth Basin to the forefront was the discovery of the Waitsia field by AWE. It is deep, but it’s a conventional and prolific gas play,” he told Stockhead.
Waitsia was discovered by AWE in 2014 and it quickly grew to become Australia’s largest onshore gas field by 2016, with first gas from the well sent down the Parmelia pipeline to Perth.
AWE was subsequently taken over by Mitsui for $600m in 2018, and since then the Japanese company has been working with Beach Energy (ASX:BPT) to drive further development of the field, with a final investment decision on stage two expected in the September 2020 quarter.
Perhaps more importantly, Waitsia proved that the porosity and permeability of the Kingia and High Cliff formations were commercial, prompting the industry to go back to the drawing board and have a look at this deep gas play, according to Norwest Energy (ASX:NEW) managing director Iain Smith.
However, it wasn’t until Warrego and Strike Energy (ASX:STX) drilled the successful West Eregulla-2 well, which proved the same productivity and the excellent sands that are present in Waitsia were also present to the southeast, that interest in the Perth Basin was really stoked.
West Erregulla-2 shattered expectations when it flowed a stunning 69 million cubic feet of gas per day (MMcfd) from the primary target Kingia Sandstone, well above the 50MMcfd target that operator Strike had estimated in September and comparable to the flow test results from the initial wells at Waitsia.
This result was extremely gratifying for Warrego’s Donald, who along with fellow executive director Duncan MacNiven, has been a long-term believer in the prospectivity of the Perth Basin and the company’s EP469 permit.
“We were well aware of the potential for Waitsia gas and actually shot the seismic in 2015, and the thing that prevented us from moving the business on was the oil price collapse,” Donald said.
“Obviously when things started picking up and Waitsia-4 was drilled then people started getting very interested in us.”
Donald also believes that the decline in the North West Shelf and delays in developing the Browse and Scarborough fields presents an opportunity for the company and other Perth Basin operators.
The same is true for Norwest. While its 80 per cent operating partner Mineral Resources (ASX:MIN) is keen to develop its own gas resources to power its mining operations, Norwest is free to market its share of gas as it sees fit.
Warrego is raising $15m through an oversubscribed placement of shares priced at 13c each to institutional and sophisticated investors and is now gearing up to participate with operator Strike in the drilling of two firm and one contingent West Erregula wells.
Drilling of West Erregulla-3 is expected to begin during the third quarter of 2020. Both West Erregulla-3 and West Erregula-4 will be drilled as future producers to support the proposed phase one development of the field.
Donald said the company had received a number of approaches from international parties looking to farm into its EPA127 block further to the north of EP469.
Strike has also partnered with Australian Gas Infrastructure Group to build, own and operate a 10-terajoule-per-day plant to process its share of gas from West Erregulla while Warrego is actively promoting its share of gas.
Meanwhile, Norwest and MinRes are looking to drill the Lockyer Deep well this year.
“There is a sweet spot around Waitsia, West Erregulla and Beharra Springs Deep where there is proven good quality reservoir rocks at depth and we lie within that sweet spot,” Smith told Stockhead.
Beach and Mitsui’s Beharra Springs Deep-1 exploration well was drilled late last year and flowed 46MMcfd during testing in December.
“We are very confident that we are going to have good quality reservoir rocks at 4,000m to 4,500m depth. We have a robust structure, we know that gas has been generated in very large quantities in the area, so we think our prospect has a good chance of success,” Smith added.
Lockyer Deep is just 15km east of Waitsia and 15km north of West Erregulla.
Smith also notes that MinRes, a well-known and financially capable miner, took up a 19.9 per cent stake in Norwest in December last year and while this has been diluted down to just under 17 per cent, remains the largest shareholder in the company.
“They obviously like what they see at Lockyer Deep and they have taken a position in us.”
Another player in the region, Key Petroleum (ASX:KEY) recently raised more than $600,000 through a share placement to progress and expand its oil fields services business and its Perth Basin operational activities.