Work on Kyalla 'game changer' well ceases

OPERATOR Origin Energy and its Irish joint venture partner Falcon Oil & Gas have hit the brakes on development of the highly anticipated Beetaloo Sub-basin shale Kyalla project in the Northern Territory due to concerns over an outbreak of coronavirus.
Work on Kyalla 'game changer' well ceases Work on Kyalla 'game changer' well ceases Work on Kyalla 'game changer' well ceases Work on Kyalla 'game changer' well ceases Work on Kyalla 'game changer' well ceases

Paul Hunt

Senior Journalist: Energy & Commodities

Paul Hunt


Overnight, Falcon (30%) told shareholders that all work on the Kyalla 117 N2-1H ST2 well had ceased and workers at the field had been reduced to a skeleton crew. 

The Kyalla well successfully reached a total depth of 3809 metres, including a 1579 lateral section, just last month. 

Water bore installation and preparation for a fraccing program was well underway. 

The Northern Territory is currently under remote community lockdowns as coronavirus cases swelled from eight to 12. 

The government introduced new emergency powers restricting access to remote communities which came into effect last night to prevent an outbreak of COVID-19 in far-to-reach regional areas.

In light of these new restrictions Origin and Falcon's employees and contractors are not able to travel to and from the Kyalla site. 

The venture hopes the delay will only be for a few months and plan to resume work on the well in the "latter half" of this year. 

The company said it would seek Northern Territorian workers to undertake minor civil and preparatory work throughout the interim period. 

Citing the unprecedented circumstances, Falcon CEO Philip O'Quigley said the company would act quickly to protect local communities. 

"While the joint venture is committed to the Beetaloo project and results to date are encouraging, the focus at this time must be on the health and safety of people," O'Quigley said. 

Kyalla has been labelled an exciting ‘well to watch' for many analysts up until this point. 

The targeted Middle Velkerri B Shale Pool holds an estimated 2C gas resource of 6.6 trillion cubic feet. 

According to consultancy EnergyQuest the Velkerri and Kyalla formations are analogous to the Marcellus shale of the US, one of the most productive, low cost, shales in North America. 

Initial evaluation of the vertical section found three source rock reservoir sections identified within the Kyalla Shale Formation, with a thickness measuring almost 900m.

The three sections are known as the Lower, Middle and Upper Kyalla reservoirs. Gross thickness of each interval is between 75m-125m.

When drilling, Origin noted that all three sections exhibited "elevated gas shows with relatively high C3, C4, and C5".

The big-budget Kyalla 117 N2 is the first of two wells the joint venture will drill targeting the Kyalla shale liquids gas play in exploration permits EP117, EP76, and EP98.

Initially Origin had planned to drill and complet the well by the end of last year. 

This was pushed back due to a variety of unforeseen issues including legal action from local farmers. 

Kyalla 117 N2 is the second horizontal well following Amungee NW1-H in 2016 which was completed just before the NT government introduced a moratorium banning fraccing and onshore oil and gas production. 

The moratorium was lifted last year. 

Origin shares were down 2.25% at $4.35 at 2pm.