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Activity the key

BEING active, building relationships and being a little bit aggressive is the way forward for Key Petroleum as it switches its focus from unconventional gas to shallow oil in the Canning Basin.

Activity the key

The company added cornerstone investor ASF Group in January, which paid almost $1.5 million through two placements to take a 19.9% stake in the junior.

As part of that deal, ASF chairwoman Min Yang has become a member of the Key board.

This investment poses interesting questions given Yang became chairwoman of fellow Canning Basin explorer Rey Resources in a controversial boardroom coup.

At the time, Rey had been touting a coal project in the Western Australian Kimberley region but switched its focus to gas not long after Yang took the chair.

While Key managing director Kane Marshall is aware of the possibilities, he is more interested in what ASF can bring to Key, which is mainly links to partners and possible financiers.

One thing Key is looking for is farm-in partners to help it drill up to three wells this year and the same next year.

Marshall is not waiting for those partners to appear though.

He has already started work on sourcing a rig and beginning the discussions with traditional owners of the Canning Basin land Key wants to drill.

The reason for this activity is simple - the eye is attracted to movement.

Marshall believes being active will help Key secure some farm-in partners.

The company's focus has also changed a bit from its early days as an unconventional gas hunter.

Unconventional gas is still in its thinking but at the moment shallow oil prospects are much more front of mind.

That is the result of some geochemical analysis the company did last year that found some big, shallow, conventional oil prospects in both the Perth and Canning basins.

These prospects in the Canning Basin are about four to five hours off the bitumen.

Given what Buru has been able to do with shipping its Ungani oil out of Wyndham, that makes for a fairly attractive proposition.

Should Key be able to find commercial quantities of oil it will cut a road from the bitumen to its wells making the trucking of the oil easier.

That oil can then be trucked to Wyndham or, if there is space available, Broome for shipping to either Kwinana or Singapore for processing.

The Perth Basin oil is an even easier option. That prospect is about five to six hours drive from Kwinana.

The plan is to drill one well in the Perth Basin and then move the rig to the Canning Basin to drill two more this year.

These oil prospects have the potential to be a game changer for Key because of the immediate revenue they will bring.

All the company needs is a farm-in partner or partners to make it happen.

Marshall said the company had the capabilities to be the operator of these wells.

He said it could also do the drilling much cheaper than some of the larger companies operating in the region.

To do this, Marshall said, the company would use smaller rigs and tap smaller contractors in the region.

Some of the drilling managers with these contractors have 30-40 years' experience in the region, which is a big plus considering how harsh and remote the country is.

Dorothy McKellar could well have had the Canning Basin in mind when she wrote My Country because it is hot and dry through much of the year and prone to flooding in the wet season.

These contractors also often have relationships with the towns in the Canning Basin.

"Our advantage is we'll being using the people who've done it all before and seen all the screw ups," Marshall said.

"It's not necessarily having all the best tools and access to the best logs. It's about getting the well delivered and getting a definitive result."

Should the oil play pay, it can then clear the way for the company to start looking at the higher cost unconventional gas opportunities it has.

Those unconventional prospects are quite challenging given they are much deeper than the oil prospects it is looking at and are about 10 hours off the bitumen in the Great Sandy Desert.

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