Barry FitzgeraldThe australianOIL industry veteran Noel Newell...

Barry Fitzgerald
The australian

OIL industry veteran Noel Newell believes the solution to the coming price and supply crunch in eastern state gas markets could lie beneath the blue-green waters of the Otway Basin off western Victoria.

His ASX-listed company 3D Oil is "positively pumped" about the region's potential to serve as a circuit-breaker to the demand squeeze coming when the first of three gas-hungry Queensland LNG export projects costing $70 billion gets switched on next year. Mr Newell's enthusiasm follows 3D's acquisition of the Otway Basin permit (T/49P) in May. Desktop assessments have since identified at least 10 leads, with the structures ranging from medium to large by world standards, and with a combined gas-in-place potential 3D estimates is in the order of 20 trillion cubic feet.

By way of comparison, the Bass Strait joint venture of Exxon and BHP -- a key player in the future response to the anticipated squeeze on supplies caused by the Queensland projects -- claimed recently that it had only seven trillion cubic feet of gas remaining, and that some of that had in fact yet to be proven.


The gas potential of 3D's permit has also yet to be proven. "It's got risks, for sure," Mr Newell said. "But it has got (geological) similarities to the North West Shelf gasfields and, what's more, it is in much shallower water and on the right side of the country in terms of accessing increasingly higher-priced domestic gas markets. It is the company's belief that T/49P has the potential to be a world-class asset."

The $28 million company -- it was up 2c, or 20 per cent, yesterday to 12c a share -- is now entertaining farm-in deals with bigger companies to put the gas potential of T/49P to the test with commitments to more seismic and drilling programs.

The offshore Otway Basin is already home to Origin's Thylacine gasfield, 70km south of Port Campbell, and the Geographe field, 15km north of the Thylacine field. The gas is processed onshore near Port Campbell. The two gasfields have a combined gas-in-place of more than two trillion cubic feet.

It is believed that Origin was pipped at the post in the bidding tussle for permit T/49P.

Mr Newell would not comment on whether Origin was one of the "large gas players" said to have been attracted to T/49P's potential. "It is difficult to know where else on the east coast you could secure the exploration rights to structures of world-class scale, in a known gas province, in shallow water, and close to infrastructure supplying an expanding, secure market," he said.

Mr Newell said that when the Queensland projects started, the demand for gas would put pressure on domestic prices. "Market consensus indicates pricing of $7 to $9 a gigajoule by 2015-16, with a likelihood of a short-term peak beyond this range. That compares to $3.50 to $4 a gigajoule in recent years," he said.

3D is also working towards bringing its West Seahorse oilfield in Bass Strait into production in the first quarter of 2015. It is a joint development with Malaysia's Hibiscus Petroleum. West Seahorse is set to have a relatively short life of between four and six years.

Because of the known quality of reservoirs in Bass Strait -- in terms of permeability, porosity and water-drive -- it is set to flow in its early days at a thumping 12,000 barrels a day.