Offshore oilers keep Perth Basin interest alive

THE offshore Perth Basin continues to tantalise explorers, as most frontier basins do, but AWE exploration manager Neil Tupper said last year he was as surprised as anyone to be part of one of just two joint ventures operating in the waters off Western Australia

Offshore oilers keep Perth Basin interest alive

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"This basin has been written off many times by many people, including me, on the basis that there is a problem with seal in the offshore basin. There are concerns about a high degree of uplift and tilting, and the reactivation of faults," Tupper told the RIU Good Oil Conference last year, when talking about the baffling geology of the offshore area of WA's best onshore basin.

AWE has really put the onshore Perth Basin back on the map over the past year with the Waistia discovery, the largest discovery in the basin since the Dongara discovery in the 1960s.

Dongara focused the explorer's attention in a certain direction, and while there are numerous anomalies and oddities in the basin, such as the Woodada gas field, the focus has been onshore.

Since the 1950s some 310 onshore and more than 50 offshore wells have been drilled, resulting in about 20 commercial oil and gas fields and numerous other significant discoveries, but just a single viable offshore discovery at Cliff Head.

There are four petroleum systems in the basin: the Permian (Cliff Head, Whicher Range), Triassic (Dongara, Erregulla, Mount Horner, and Yardarino); Jurassic (Walyering ) and the not fully defined Cretaceous source in the offshore Gage Roads-1 non-commercial oil discovery.

Fresh look

AWE took a fresh look at the offshore basin following its recent success onshore at Waitsia, and wound up securing WA-512-P which sits over the Houtman-Abrolhos sub-basins in 2014.

The company, which has a controlling interest in the Cliff Head oil field, the only commercial offshore production made to date, joins Murphy Oil, Samsung and Kufpec as the only parties interested in the offshore area after burst of exploration in the early 2000s that petered out by 2008.

The underexplored offshore area contains just two dozen wildcat well penetrations across 40,000sq.km, about half of the total basin area of 100,000sq.km, so it is little wonder that Cliff Head is the only commercial discovery, although there have been residual oil columns and sub-commercial fields found during the decades of drilling.

WA-512-P is an area larger than the entirety of AWE's onshore holdings, which is an exciting opportunity, but no one has found any other fields worth developing besides Cliff Head to date.

Encouraging

"It is quite encouraging in these times, despite the fact that we have been working some of these areas for more than 30 years, that we are still coming up with blocks and prospects that look pretty exciting," Tupper said of the recent Waitsia field.

If the Kingia and High Cliff sandstones can host what could be one of the largest gas resources found since the 1950s, why can't there be any giants lurking offshore?

The offshore Perth Basin has similar geology to the onshore areas, and AWE is targeting the same Permo-Triassic plays, with the same Kockatea Shale and Wagina Formations mapped and potentially the deeper Kingia sandstone.

Past exploration of WA-512-P found a residual oil column in the Morangie-1/ST1 well, which offers some encouragement that hydrocarbons have been generated and migrated into the area.

"I am not altogether surprised, because the throw on the fault and that reactivation effectively offsets the Wagina Sandstone against the late Triassic sandy sequence, so there is effectively a seal breach of the structure, but the presence of residual oil does show a perming Permo-Triassic petroleum system offshore," Tupper said.

AWE is looking further out from shore, to the east, where it believes it has defined possible a Waistia analogue - a downthrown fault closure against basement, and some individual fault blocks with less throw where the faults have not reactivated.

"This looks to be good exploration territory … I think this a really promising play."

Spilt permit

In the inner part of WA-512-P it has defined a number of leads - Glenn, Shepard and Hadfield - in a mix of Permian highs, low-side fault blocks and Buttress traps.

Combined mean prospective resources for the Permian play are estimated at 150MMbbl with P10 upside to 300MMbbl.

The inner section contains part of the Abrolhos Sub-basin, and has seen the most drilling, with the Wittecarra-1 and Flying Foam-1 wells and the Yalthoo Trough present.

AWE's primary focus is the tilted fault blocks of the Wagina sandstone, sealed by the overlying Kockatea shale. Low-side fault closures, such as those productive at Redback and Senecio, have also been mapped.

The outer area of the block focuses on the Houtman Sub-basin, which is less understood and less explored, but there is Livet-1 that intersected a Permian sequence, possibly above basement, which suggests the block has relatively shallow Permian targets.

"Going outward we cross a major fault, so we have to ask what the sequence is: it's probably some Jurassic and Cretaceous, but where is the Kockatea Shale? Is there a thickening of the Kockatea?" he asked.

Questions

There are a lot of interesting amplitude anomalies on the existing seismic that AWE is still to get its head around.

The amplitude-supported Gagarin lead covers a mapped 280sq.km in an Early Permian graben sub-cropping against the Kockatea shale and bounded by several faults with potential for up to 3Bbbl or 6Tcf of wet gas.

Geoscience Australia is collecting some data to the north, and Tupper expects the basin will get some more attention going forward.

"It's an exciting, long-term play for AWE."

AWE's block, which extends out from Murphy's, does not require any drilling until 2019.

The 12,400 sq.km block has 13,000km of existing 2D and there are three 3D surveys.

The three last wells drilled in the area - Hadda-1, Flying Foam-1 and Haddich-1 - were dusters, although past drilling has proven evidence of paleo oil columns.

ROC Oil Company was targeting the Late Permian Dongara Sandstone, with secondary targets in sandstones within the underlying Irwin River Coal Measures. Targets were 30-65MMbbl.

Water depths range from 100m to 1500m.

AWE interprets that many of the wells previously drilled in the Houtman Sub-basin were unsuccessful due to unfavourable sand-on-sand, fault juxtaposition. AWE has processed the seismic and believes it has defined prospects with favourable sealing configuration.

AWE is seeking a partner to aid with exploration, which is all desktop work in the primary term.

Cliff Head

Minnow Elixir Petroleum is aiming to be the new kid on the block, if it is successful in buy-in AWE's stake in the Cliff Head oil field, although the deadline to close the deal for the 57% interest has been missed several times since it was announced last year.

While it is paying very little, $1 million up-front, with $9 million in milestone payments, it is taking on a significant abandonment liability.

Elixir managing director Dougal Ferguson believes the deal still makes sense, even at a low oil price, as with abandonment at least 10 years away the field should still cover costs and liabilities and make a profit, albeit a small one at US$40/bbl, with upside for increases with the oil price, and a $50/bbl oil price increase would be significant.

Having a stake in the only offshore field in the basin also offers exposure to some lower risk nearfield opportunities and at least one shot at an exploration well.

The field is still pumping around 1300-1500bopd from five wells, and has around 3.7MMbbl (2P) remaining, and could deplete in 2024, and the onshore Arrowsmith plant will no longer be needed from 2029.

The reservoir performance is highly predictable, and BP is contracted to take at least 500bopd of production.

Operator Fosun International is seeking to reduce operational costs, and has been keen to tackle near field opportunities

A year ago Elixir would have needed to pay $30 million, now it is on the market for a fraction, and it is considered a distraction for AWE.

It would position Elixir as one of the few producing companies in WA, and it offers not only PRRT offset credits, but it is a stepping stone into the Perth Basin, which is undergoing a small onshore revival.

Ferguson says the offshore Perth Basin has some way to go.

Fondness

Elixir chairman Ray Barnes, who used to be the chief technical director at Voyager Energy around the time of the original Cliff Head discovery, retains a fondness for the Mentelle prospect, one of the many Perth Basin heartbreakers.

"There is a reef, Horseshoe Reef, and we weren't able to get good seismic over it, so we drilled the well as close as we could get on not very good seismic coverage, an experience that always fails in my experience, and subsequently we shot some more seismic and it was clear that we were right off the structure," he explained.

Mentelle-1 had oil shows, and Barnes believes there's a good case to be made for drilling a well up-dip.

"As an explorer, that's the kind of thing that gets me out of bed in the morning."

There are also potential untapped reserves in the western part of the Cliff Head field, where well performance suggests there is more oil that isn't being produced.

There is more technical work to be done to understand where the oil is.

There could be an additional 5-10MMbbl in the area, which is enough to extend the field life.

"What we have come to understand is that both parties, AWE and ROC (Fosun) have carried this upside on their books, and at different times they have been interested in doing some work to investigations, but it has never happened at the same time, so they have never been able to co-include their aspirations. ROC and AWE have really focused on production," he said.

Prospects identified so far range from high impact exploration (Mentelle updip), low risk appraisal drilling, EOR projects and several other opportunities, such as the Cliff Head South lead and the SE Lobe.

A company Elixir's size it unlikely to be capable of funding a Perth Basin well, so a farm-out would almost certainly be requires.

Murphy Oil

US oiler Murphy (30%) leads the only other offshore Perth Basin JV, having entered the basin with Kuwait's state oiler Kufpec (30%) and Korea's Samsung Oil & Gas (30%) a few years back, but while it has drilled three dusters so far the US independent hasn't relinquished the block just yet, although Murphy has been scaling back its international interests with the collapse in the oil price.

Murphy drilled Munia-1, Koel-1 and Cisticola-1 last year, and while the company hasn't said much about the cost of the campaign, the joint venture partners could not have expected much change from $120 million, assuming a day rate of $US430,000.

Koel-1 was drilled about 30km from 2007's Dunsborough-1 oil and gas discovery, targeting the Dongara sandstone and Irwin River Coal Measures, while Cisticola-1 was drilled 55km south-west of the Cliff Head oil field.

The trio was awarded in WA-481-P in 2012, promising a guaranteed work program comprising 4,738 km of 2D seismic reprocessing, 550 km of new 2D and 2,550sq.km of new 3D seismic and the three wells.

A secondary work program could see two additional wells, but so far so decision has been made about whether Murphy will renew the permits for a second term so far.

The trio won out against three competing bids to secure the 17,475sq.km licence that includes much of the former WA-286-P, the original Cliff Head licence operated by ROC.

The block takes in the Abrolhos Sub-Basin with some parts of the Houtman and northern Vlaming sub-basins, and has water depths typically less than 200m.

Studies

A Geoscience Australia study over the area several years ago highlighted more regionally extensive source rocks than previously thought, where they have good to excellent potential for generating oil.

There are now 12 well penetrations around Cliff Head resulting in three small discoveries within WA-481-P, and there is a mix of 2D and 3D seismic shot between the 1960s and 2009.

The first offshore Perth Basin well, Gun Island-1 was drilled in 1968. Exploration ceased in 1983 and drilling rigs did not return for almost 20 years.

When Cliff Head-1 was drilled in 2001 it lead to a rapid uptake of permits, but it was not until 2007 that there was any level of follow-up success with Frankland-1, Dunsborough-1 and Perseverance-1 all finding gas.

Perseverance-1 contained 40% carbon dioxide, while appraisal drilling in 2009 downgraded Frankland and proved only residual oil in Dunsborough.

Lilac-1 was the last exploration well drilled before Murphy took up the block and encountered sands with weak gas shows.

Murphy declined to speak publically about its Perth Basin project, but Energy News understands that its three-well program results were technically interesting.

Permian plays

While geologists have no problems in finding interesting subsurface problems to puzzle over, AWE, Elixir and Murphy all appear to be in agreement that the offshore Perth Basin has remaining potential.

In a paper co-authored by GIS-pax's Ian Longley and delivered at the Good Oil Conference by Murphy explorationist Darren Ferdinando examined the Permian play's potential across the entire basin.

The late and early Permian Plays are proven to host oil and gas pools, and when combined, form the majority of the hydrocarbon resources discovered in the northern Perth Basin to date, although there have been no significant Late Permian discoveries since 2007 suggesting much of the Late Permian resource has been found, however the Early Permian is a more recent addition, with discoveries such as Senecio-3 illustrating that there are still potentially a number of new discoveries to be made in the deeper stratigraphy.

Ferdinando's work shows that while the average the pool volume for the Late Permian play is 9MMboe, for the Early Permian play appears to be 33MMbboe.

The majority of discoveries drilled targeting the Permian in the northern Perth Basin to date have overwhelmingly been hosted in simple high-side fault traps.

With the discovery of the Waitsia field sealed against a lowside fault, the prevailing paradigm of targeting the high-side structures may start to change, Ferdinando found.

The Late Permian discovery rate is about 37% for both commercial discoveries and technical successes, while the balance of the wells resulted in wells drilled off structure with poor quality seismic (28%), poor trap tests (27%) or valid tests that were simply dry (9%).

Within the Late Permian play, trap failure is the most common failure mechanism within exploration wells (48%), reservoir was not effectively developed in 24%, change was missing in 16% and non-trap related seal failure was the cause of about one in 10 (12%) dusters.

Murphy says that reflects the experience where it is clear trap failure from uplift during the early Cretaceous Valanginian era and variable reservoir quality within the Dongara Sandstone and Wagina Formation are both recognised as significant risks.

Successful tests of Early Permian targets have been more elusive than in the Late Permian play, with only 17% of penetrations into the Early Permian discovering moveable hydrocarbons.

Most of the dry holes were drilled off-structure, and of those almost half again were lacking effective reservoir or with a breached trap the other major cause of failure.

Of the six successful exploration tests of Early Permian pools at Arrowsmith-1, Cliff Head-1, Drakea-1, Corybas-1, Hovea-2 and Senecio-3, the hydrocarbon column height varies from 40-350m.

Targets

Murphy found the potential for Early Permian targets is best in the Abrolhos Sub-basin and Turtle Dove Ridge due to greater chance of reservoir development and the possibility of porosity preservation at depth, as shown by the Kingia Formation and High Cliff Sandstone as seen in the Senecio-3 and Waitsia-1 wells.

And there are a number of undrilled deeper targets both onshore and offshore, and probability suggests there may be a significant scope for a number of discoveries to be made.

Murphy's work has focused on the offshore area close to the Urella Fault, while onshore Ferdinando suggested exploration should focus south of the Waitsia discovery, the region around the Drakea oil discovery.

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