Real Energy is well placed to capitalise on a looming shortfall in domestic and international gas thanks to its large holding in Queensland's Cooper Basin.
High gas prices on the east coast already have the domestic market looking to secure contracts and there is heavy demand for LNG from overseas.
Gas prices are expected to reach $8-$11 per gigajoule.
Some of the game's giants including BG Group, Origin Energy and Chevron Corporation have already stepped into the basin, but there is plenty of room for local players that have their finger on the pulse.
According to Real Energy co-founder and CEO Scott Brown, the Cooper Basin is extremely attractive for several reasons.
"Infrastructure is already in place, and the area is well serviced by gas pipelines that connect to east coast cities and LNG facilities for export," he said.
"There is strong well control and seismic coverage and the basin is well served with active international service providers."
However, perhaps the most exciting point is that Real Energy believes its acreage contains a continuous basin-centred gas play which is laterally extensive over a wide area. The key point about the BCG concept is the trap is not dependent on structure, and gas is generally present in the centre or deeper parts of the basin, in particular formations - such as the Toolachee and Patchawarra formations - wherever these are found.
The junior's areas were interpreted to have potential for the BCG play due to the depth and presence of elevated gas readings and gas recoveries without water in numerous past wells drilled. The previous wells indicate three key features of deep basin centred gas play:
- The presence of elevated gas readings recorded over the whole Toolachee and Patchawarra sections in numerous wells previously drilled to target the conventional sandstone reservoirs in structural traps;
- The gas is over-pressured and many wells encountered gas columns with height in excess of the structural closure; and
- There are source rocks within the Toolachee and Patchawarra sequences with good to excellent quality and are in the gas generating windows.
The other prime mover for Real Energy is that technology is improving the economics of these unconventional and emerging plays.
"The technology is extending the envelope all the time," Brown explained.
"We can achieve longer laterals and multi-state fraccing, and realise far more productive wells in terms of flow rate with a greater recoverable percentage."
The technology Brown mentions comes from the US, which has been perfecting the expertise and equipment needed for unconventional oil and gas plays over the last 15 years.
There has been a significant upturn in production from unconventional reservoirs in the US and now North American service providers are increasingly bringing their know-how to Australia.
Already there are US-based service companies on the east coast with the new technology on hand to service emerging plays in Cooper Basin.
Real Energy controls three large permits covering 8314 square kilometres (2 million acres) in the Cooper Basin, the premier location for unconventional exploration and production in Australia.
The tenements contain vastly under-explored areas and provide a number of opportunities for the company including unconventional basin centred gas/condensate targets in the Permian, unconventional shale oil resources within the Toolebuc shale formation and numerous conventional oil and gas targets within Jurassic sandstone reservoirs.
Seismic has identified that the Toolachee and Patchawarra formations are significant in Real Energy's acreage.
An independent geologist has assessed the areas have 10.2 trillion cubic feet of gas in place. The company received early encouragement with its Queenscliff-1 well intersecting gas in the Toolachee and Nappamerri formations, particularly as the well was drilled well outside any know structural closure.
The well, in ATP 927P, was drilled to confirm the presence of basin-centred gas and determine reservoir productivity and will reach a total depth of 3200m.
"While we are still drilling and later running wireline logs for evaluating the significance of the gas seen in the well, Queenscliff-1 results so far appear to be very encouraging," Brown said.
The company recently raised $5 million through a private placement to fund production testing to get its reserve certification.
Queenscliff-1 follows the Tamarama-1 well that intersected 81m of strong net gas pay in the target Toolachee and Patchawarra formations.
One of the keys to Real Energy's success will be flow rates and results from neighbouring wells are encouraging.
"Around our permit [ATP 927P] there have been 25 wells drilled in close proximity, which at a minimum, all have some gas shows in the Toolachee and Patchawarra formations," Brown said.
"Some have excellent flow rates up to 11.35MMfcpd from an unfracced vertical well. Santos has recently made three gas discoveries in the adjoining blocks [and] every well they have drilled has had gas in them."
In fact it is believed many of Real Energy's wells won't even need fraccing because they will flow easily due to depth and permeability.
The company's blocks are in the shallower areas of the Cooper Basin which means the reservoirs should not be as tight and may flow at better rates, whereas deeper wells are more likely to need fraccing.
This also keeps the drilling costs down because deep wells get to higher temperatures and require higher specification tools.
But even if fraccing does need to happen, Real Energy's blocks are all on pastoral leases and the company has a good relationship with local farmers, unlike some areas of the country where local communities have opposed the practice under the Lock The Gate banner.
An experienced oil and gas man, Brown has been involved in the industry for several years.
Real Energy started in 2009 after Brown, then chief financial officer of Mosaic Oil, engineered a $142 million deal to sell the junior petroleum production and exploration company to AGL Energy.
"We then took a few years to find a deal in the Cooper Basin suitable to our needs. We knocked on a lot of doors," Brown recalled.
Real Energy came to fruition in 2010 when they picked up two blocks, ATPs 927 and 917, and a further big block, ATP 1161, the following year.
The company was floated in 2013 and has not looked back.
Its growth strategy for the short term is targeting a 3P (proven, probable and possible) of 300 billion cubic feet of recoverable gas which has the potential to be worth in excess of $300 million.
Longer term the objective is to certify 3P reserves in excess of 2Tcf of gas.
"Our aim is to develop a tier one gas project in the Cooper Basin within the next three years," Brown said.
It looks like the company is on target to do just that.
This article was commissioned by Real Energy for the December 2014 edition of affiliated publication RESOURCESTOCKS.