Senex hopeful on unconventionals

SENEX Energy CEO Ian Davies has told Energy News that the Brisbane junior and partner Origin Energy could make their geologically complex unconventional gas work for less than the medium-term forecast east coast gas price range – they just have to flow it at commercial rates.
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The first stage assessment involves a $105 million work program in which Senex is free-carried, and while Davies admits there's "no guarantee of success" there's a big future if the JV can make it work.

"Even on a real success type case, it's three or four years by the time you start exploration through to producing gas in material quantities, then given where the gas supply-demand dynamic on the east coast is, it's the perfect time to get gas proven up to get it to market," Davies said.

"[The east coast] will be short of gas, there will be a deep and liquid market, and pricing will be robust, and it needs to be for technically complex unconventional resources such as this.

"There's no doubt that between Origin and ourselves we've slowed down a bit during the oil price rout, and now we're willing to put money into the ground to try to prove up these longer-dated assets."

The first stage will see four wells in the south and two wells in the north to start, with a second stage to follow.

The JV drilled two wells in the south with Origin over the last six months down to 3200m; the next, Silverstar-1, will be about 3500-3800m in the north, which Davies says will be drilled before Christmas.

All wells in the program will target depths between 2500-4000m.

Davies is well aware of the ebb and flow of the industry's hype over unconventional gas following the US boom that has resurrected the country's manufacturing base and lowered emissions.

It seemed like everyone was getting into it until sentiment dimmed locally and Chevron Corporation pulled out of its Cooper Basin jaunt with Beach Energy, while ConocoPhillips and Petrochina ended their Canning Basin dreams.

However, unlike the Canning, where there is a stark lack of infrastructure, there is a more positive history of past drilling in the Cooper Basin.

"We know there's a large quantity of gas there from all the wells that have been drilled there previously," Davies said.

"We just need to prove we can get it out of the ground at commercial quantities.

"Beanbush-1 is a good example, and other wells around there.

"Unconventionally it's quite complex, so we need high flow rates and lots of gas per well."

He says the gas will cost north of $5/gigajoule to develop, and while current domestic pricing is all over the place, most analysts are forecasting between $7-9/GJ on the east coast in the medium-term.

"We're a believer in the east coast market, and we're trying to find more resource to put into it," Davies said.

Senex has started fracture stimulation on the first of the two southern Cooper Basin gas exploration wells during 2015-16.

"We have the appetite, financial capacity and strategic clarity to support growth through new projects, organic or inorganic," Davies told analysts during this week's first-half earnings call.