Energy explorer targets WA shale prospects

explorerTHE first company to successfully drill a shale gas well in the Perth Basin, Norwest Energy continues to move onward and upward.
The Perth-based company described its September quarter as a busy and challenging part of an “exciting” 2013. According to its website, Norwest has a “lean and tightly focussed structure,” spending its time exploring acreage in overlooked areas.
The northern Perth Basin is the company’s core Australian exploration region but it also has three project areas of interest on the other side of the globe, in the Wessex Basin, onshore southern England.
The Perth Basin has recoverable shale gas reserves of about 59 trillion cubic feet of gas, which, if completely exhausted, could power a Perth-sized city for hundreds of years.
Exploration in the Perth Basin began in the 1940s and, according to government agency Geoscience Australia, 26 petroleum accumulations have been discovered within the basin – 13 of which are commercial. While more than 280 wells have been drilled in the basin, most discoveries are made onshore in the northern portion. Norwest holds 567,069 net acres of interests in the Perth Basin and chief executive and director Peter Munachen said the area was a great place for a shale project.
“The attraction of the Perth Basin is the pipeline, the good market, the good price,” he said.
“You have constant advantages because of its location.”
Norwest’s main target, the Arrowsmith field in the basin’s north, is believed to be rich in shale gas and is arguably the most crucial asset to the company’s Australian success.
“For the coming year, our core focus is on the Arrowsmith project,” Norwest chairman Michael Fry said at the company’s most recent annual general meeting.
“The ongoing exploration and development initiatives we have planned will require access to capital and Norwest is actively seeking partners to fund key projects.”
Arrowsmith Norwest recognised the opportunity to pursue Arrowsmith at an early stage, when the US Energy Information Administration found the northern Perth Basin to contain 59tcf of recoverable shale gas reserves, according to the company.
The EP413 area covers 508 square kilometres and is owned by AWE Limited (44.25 per cent), Bharat Petro Resources (27.8 per cent) and Norwest (27.95 per cent and operator) in joint venture.
The first Arrowsmith well was drilled by French Petroleum in 1965, which gave a gas flow rate of 4 million cubic feet per day. Almost half a century later, in 2011, Norwest drilled Arrowsmith-2.
The company reported that the target formations contained a combined prospective 2P resource of 2.6tcf and a contingent 2C resource of 316 billion cubic feet. Norwest’s September quarterly report stated that the well had a maximum flow rate of 3.5 million standard cubic feet per day and an average of 312,299scf/d across a 38-day period.
Investment research company Edison stated in its most recent report for Norwest that the next 12 to 18 months were critical, “as appraisal results from its Arrowsmith-2 discovery are analysed and a horizontal, multi-fracked pilot well is drilled to test Arrowsmith’s commercial viability”.
“If commerciality can be established, the ultimate prize Norwest is chasing is full development of an Arrowsmith tight gas field comprising perhaps more than 80 wells and 300bcf of produced gas,” the report said.
At present the well is shut-in for the evaluation of gas and water analysis and will be suspended once evaluation is complete.
Norwest stated that the process of gaining regulatory approval for a future drilling program, involving Arrowsmith-3 would begin in early 2014.
“Arrowsmith-3 will be a horizontal well with multi-stage fracking and is planned for late 2014 or early 2015, subject to the availability of equipment and the regulatory approval processes necessary to complete these wells,” Mr Munachen said.
“Additionally we will be conducting a 3D seismic survey in the third quarter of 2014.”
Just 17km from the field is the Dampier to Bunbury gas pipeline and another pipeline system called the Parmelia, which runs through the region.
Mr Munachen said the proximity of major pipelines to Arrowsmith was a perfect situation for the project.
“You’ve got opportunities to plug into significant pipelines, and the gas price in WA is quite attractive from our point of view,” he said.
Gas from the Arrowsmith project would be piped into the domestic market, as the export market is well catered for by gas from the massive $27 billion North West Shelf project — a joint venture between BHP Billiton, BP, Chevron, Japan Australia LNG, Shell and Woodside.
“We’re concentrating our studies andopportunities built around gas being sold into the domestic market and we’ll leave the North West Shelf and export market to the big boys,” Mr Munachen said.
The Perth Basin
Although its focus is mainly on Arrowsmith, Norwest has a number of other interests in the Perth Basin that give the company a solid foundation inthe area. Norwest holds 100 per cent of TP/15, a permit area off the coast near Dongara inside the 3 nautical mile wide state territorial boundary.
TP/15 is close to the Jingemia, Eremia and Cliff Head oil fields and the Dongara gas field. Norwest is in discussions with potential farm-in partners to assist with funding future work programs on the permit.
“In the meantime we are planning a 2D seismic program over the area which would be part of the farm-out package,” Mr Munachen said.
In the northwest Perth Basin the company has a 20 per cent interest in the EP 368 permit and 22.22 per cent interest in the EP 426 permit, in joint venture with operator Empire Oil and Gas and others.
The project is estimated to contain potential recoverable reserves of 3mmbbls of oil in the Arranoo Member and 22mmbbls of oil in the Dongara Sandstone, with the possibility of a further 300bcf of gas.
“The North Erregulla prospect lies on the boundary between these two blocks, and a 3D seismic acquisition program is planned for 2014 to further define the target,” Mr Munachen said.
“These blocks have the potential for both oil and unconventional gas.” Norwest is also interested in an area located at the southern end of the onshore Perth Basin, along the coast in Special Prospecting Authority STP-EPA-0064.
“Norwest is in the process of finalising negotiations with the Traditional Owners, the Yued people,” Mr Munachen said.
“We expect to sign off an access agreement with them in the New Year, in which case the SPA will be converted to an exploration permit. It will probably take another six months for that to happen.
“Then we would conduct a 3D seismic program over the most prospective part of the block, however this would be unlikely to occur until 2015.”
The UK
Norwest’s interests in the Wessex Basin fit with the company’s strategy of looking for significant oil and gas discoveries in underexplored regions.
“Preliminary results have been very positive and indicate Norwest’s geological model for the basin is sound,” the company’s website stated.
The area contains Western Europe’s largest onshore oil field, Wytch Farm, which is immediately west of Norwest’s offshore acreage and has reserves estimated to be 500mmbbls.
Norwest operates and has a 65 per cent interest in permit P1928, offshore Southern England in the English Channel, opposite its two onshore permits. The project is a joint venture between Norwest and Wessex Corporation, which holds the remaining 35 per cent.
Mr Munachen said the offshore permits surrounded the Wytch Farm oil field and the company was “very optimistic about its potential”.
The licences were awarded to the company in 2011 and it has identified six structural leads with a 15 to 32 per cent chance of success. The company still needs to interpret recently acquired 2D seismic data to define prospects suitable for a drilling program during 2014 and 2015.
Onshore, the PEDL 239 permit on the Isle of Wight is another area of interest for Norwest; it has the potential for both conventional and unconventional hydrocarbons. The company’s last UK asset, PEDL 238 on the coast of Dorset, could also contain several attractive leads. Norwest holds a 75 per cent interest in PEDL 239 and a 50 per cent interest in PEDL 238, and is operator of both permits.
Across Norwest’s three project areas, an evaluation identified several significant oil and gas leads.
“We see excellent potential with the UK blocks however we are working to farm those out to assist with future permit commitments,” Mr Munachen said.
The future
Norwest has expressed great confidence about the future of the burgeoning shale industry in WA.
The company has a solid base in the Perth Basin and is looking forward to success at its Arrowsmith operation, but although there were upsides to the area it was still only a young industry, Mr Munachen said.
“The potential for the industry is really good,” he said.
“One of the challenges of course is the availability of equipment and reducing the cost of drilling and fracking wells to a more economic level.
“As activities ramp up you’ll get more equipment providers and service providers appearing on the scene.”
Mr Munachen said there was a lot of activity on the horizon and Norwest was excited and optimistic about its future in the Perth Basin.