South Australia: resourceful state back on track

South Australia has produced oil and gas onshore since early 1960.

South Australia has produced oil and gas onshore since early 1960.

By Emma Brown

SOUTH Australia has produced oil and gas onshore since the discovery and development of the prolific Cooper Basin in the 1960s. Today, the state’s Cooper and Eromanga basins are Australia’s largest onshore petroleum provinces.

For many years, South Australian oil and gas activity focused on exploration and development, however, the recent crude oil price plunge has had a knock-on effect with the region’s exploration projects.

South Australian Chamber of Mines and Energy (SACOME) acting chief executive Nigel Long said it was clear that the oil price crash, and its direct ties to the gas price, had had substantial implications for the industry.

“[This is evident from] the recent announcements by Santos, Beach and others,” Mr Long said.

“Some projects will be delayed, there is no question, but the magnitude of the impact of exploration, I cannot answer at this point.”

Last December, major South Australian gas player Santos adjusted its projected 2015 capital expenditure from $2.7 billion to $2 billion to align with market conditions.

Santos managing director and chief executive David Knox reaffirmed the strength of Santos’ financial position, despite falls in the oil price and the company’s share price.

“We remain on track to realise the cash flow benefits in 2015 and 2016 from our growth investments in recent years,” Mr Knox said.

“The current volatile oil price means that Santos is focused on driving operational efficiency, reducing costs, prudently managing capital and making sure our balance sheet remains strong – without making short term reactive decisions that could damage the long term interests of the company or the interests of shareholders.”

In February, Santos announced a $1.6 billion non-cash hit in its full year 2014 results, with the company taking $482 million charge on its oil assets, a $49 million charge on its unconventional exploration assets in the Cooper Basin, and a $566 million charge at its Gunnedah Basin project in NSW.

Cooper Basin player Beach Energy reported a 17 per cent decline for the December quarter.

The recent downturn prompted Beach to undertake a detailed review of its capex program for the second half of the financial year, and reduce its capital spend by around 20 per cent. This reduction mainly affected South Australian Cooper Basin and South West Queensland JV gas projects, as well as discretionary drilling and infrastructure projects.

Beach Energy is a big player in  South Australia.

Beach Energy is a big player in South Australia.

 

Cooper Basin

The Cooper Basin extends from northern South Australia into southwest Queensland and is one of Australia’s premier onshore oil and gas regions.

Santos has produced gas from the province since the 1960s and oil from the late 1970s.

There are currently 12 operators in the Cooper Basin region, including Ambassador Exploration, Beach Energy, Discovery Energy, Drillsearch, Holloman Petroleum, Senex Energy and Victoria Oil.

Mr Long said the Cooper Basin currently has about 190 gas fields and 115 oil fields in production.

“These fields contain approximately 820 producing gas wells and more than 400 producing oil wells which feed into production facilities at Moomba in South Australia and Ballera in Queensland through approximately 5600 kilometres of pipelines and flowlines via 15 major satellite facilities incorporating field boost compression,” he said.

In the 2012-2013 financial year, the Cooper Basin produced 68.47 petajoules of gas (including some ethane), more than 6.7 million barrels of oil, 130,218t of LPG and 175,668 kilolitres of condensate, according to South Australian State Development department records.

The Cooper Basin also has abundant resources of unconventional gas, which includes shale gas, tight gas and hydrocarbons from coal.

Santos produced Australia’s first shale gas at commercial flow rates from the Moomba 191 well in 2012, and exploration continues in the region.

BG and Chevron have also begun exploration using 3D seismic data and directional drilling.

There are currently more than 20 joint ventures exploring for both shale and tight gas in South Australia.

 

An aerial view of Santos’ Moomba processing plant in the Cooper Basin.

An aerial view of Santos’ Moomba processing plant in the Cooper Basin.

Otway Basin

The Otway Basin, which extends to Victoria and offshore Tasmania, first produced gas in the 1980s.

“More recently, exploration targeting shale gas plays has been undertaken with two exploration wells by Beach Energy in 2013-2014,” Mr Long said.

“It is early days but there is a degree of confidence in new conventional gas plays as well as shale prospects.”

Beach Energy (70 per cent) and Cooper Energy (30 per cent) began exploration at Bungaloo-1 and Jolly-1 wells targeting deep tight sandstones and shales offshore. Drilling from the wells showed positive results that could potentially reinvigorate the region’s gas industry.

Beach Energy managing director Reg Nelson said the company identified easy-to-produce conventional reservoirs as well as deep unconventional targets within the Jolly-1 and Bungaloo-1 wells.

“Beach was always searching for shallower gas reservoirs, as well as gas held at depth,” Mr Nelson said.

“We believed that most of the commercially viable targets – around 2000m in depth – had been developed, so this news is promising.

“Our plan in drilling these two wells was to gather a greater understanding of the Basin’s geology at depths that had not been looked at before.

“These exciting results indicate that the Sawpit Sandstone has good reservoir quality at depths of around 3150m in Jolly-1, one of the deepest intersections in this part of the Penola Trough.

“Targeting this reservoir in the deeper parts of the Penola Trough potentially opens up a new play for conventional gas.”

 

Bight Basin

South Australia’s Bight Basin is known as the last under-explored Cretaceous delta in the world. The area extends across the South Australia-WA border, covering more than 800,000 square kilometres.

The Bight Basin has notoriously challenging weather conditions, which makes exploration difficult. However, numerous companies have carried out work programs since 2011, including BP, Bight Petroleum, Chevron, Santos and Murphy Oil.

Mr Long said further seismic activity was conducted in the area across the past year.

“BP has purchased the construction of a new drilling vessel to undertake exploration drilling in the Bight Basin sometime in the next two years,” Mr Long said.

In 2011, BP was granted permits in the region covering 24,000sqkm; a program worth $1.4 billion over six years.

 

Training

The Onshore Petroleum Centre of Excellence opened in February, which will allow oil and gas workers to gain formal qualifications offsite that were previously only available via in-house training.

The purpose-built centre is a first for South Australia and was collaboratively funded by the state government and industry partners.

Mineral Resources and Energy minister Tom Koutsantonis said the centre would train hundreds of industry workers in a fully immersive, simulated oil and gas production environment, without the need for costly fly in, fly out arrangements.

“It is a testament to the strength of our collaboration with industry partners such as Santos, Beach Energy and Senex Energy, who have committed funds, valuable equipment and expertise to the new training centre,” Mr Koutsantonis.

“There’s no doubt the training facility with elevate South Australia as the nation’s and the South East Asia region’s premier destination for learning and innovation in onshore oil and gas.”

Mr Long said the centre would place South Australia at the forefront of education, research, skills training and investment attractiveness for the industry.

“It would be hoped the OPCE will also attract international companies operating in South Australia to establish region head offices in the state,” he said.