Feature article at Energy News Premium where Brad Lingo goes into good detail about wet gas development potential.
Cheers
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Drillsearch unlocking the hidden value of wet gasFriday, 28 November 2014
David Upton
WET gas is set to be the next big growth story from the Cooper Basin, and could even rival the oil revenues that have flooded from the western flank.
The somewhat misnamed commodity doesn’t create a lot of excitement among investors, who seem to see ‘gas’ and ‘wet gas’ as being about the same. But, when you do the math, the real value is clear.Wet gas fields in the Cooper Basin can produce between 50 barrels and 200bbl of condensate and LPGs for everyone million cubic feet of gas.
So a typical wet gas well delivering 2MMcf per day would also produce between 100-400bbl of liquids.The gas is worth about $10,000, while 100bbl of liquids is worth another $8000 at prices of $5 per gigajoule and $80/bbl respectively. Liquids almost double the value compared to the same volume of dry gas.If the field is as at the high-end of the wetness range, and produces 400bbl of liquids, a wet gas well is worth about five times more than its dry gas equivalent.
Wet gas in the Cooper Basin is predominantly found in the Patchawarra Trough, which is shallower and less ‘cooked’ than the Nappamerri Trough to the south.While Santos has been producing liquids for decades, the big mover in wet gas is Drillsearch Energy, which has greatly expanded its coverage of the Patchawarra Trough through takeovers of Great Artesian Oil & Gas, Acer Energy and Ambassador Oil & Gas over the years.In 2014-15, Drillsearch will spud almost as many wet gas exploration or appraisal wells as oil exploration and development wells.A total of 18 wells will be drilled across a number of projects.
Five wells will be drilled at the Beach Energy-operated Middleton-Brownlow project in PEL106, where the equal joint venture partners have set the template for producing and selling wet gas into the Moomba hub.Another eight wells will be drilled under a new joint venture with Santos [the first of which, Varanus South-1 has been confirmed as a discovery], while a further five wells will be drilled at Drillsearch-operated projects in the northern Cooper Basin.Managing director Brad Lingo told Energy News the company’s wet gas projects span from the Middleton-Brownlow project in the southwest end of the Patchawarra Trough all the way up to the Flax/Juniper/Yarrow gas discoveries.“
Across that entire stretch we average a low end of about 50bbl/MMcf of raw gas, to more than 200bbl, associated with Canunda and Coolawang discoveries,” he said.“And at Flax and Juniper, the fields are so liquids rich we actually classify them as oil fields with high levels of gas. They are some of wettest fields in the entire Cooper Basin.”Drillsearch’s wet gas strategy has two arms, and either one could take the company a long way towards its goal of doubling annual production from FY14’s 3.4MMbbl of oil equivalent in the next five years.
The first arm is the development of a number of lookalikes to Brownlow-Middleton across Drillsearch’s expansive wet gas acreage, including the recently expanded northern areas.“We believe we should be able to build four or five of these additional production satellites, with each one targeting wet gas production of 10-15MMcfpd,” Lingo said.“At a low rate of 50bbl/MMcf of gas, that would have us producing another 500bbl from each wet gas production satellite per day.“If we had five of those satellites that would be 2500bpd plus gas. And if we are producing at 15MMcfpd that would be just under 5000bpd of hydrocarbon liquids.” That is starting to approach Drillsearch’s net share of oil, which topped 8100bbl in the first quarter of FY15, even with the assumption of low-case liquids content.
Forecasts of a sharp rise in eastern gas prices as LNG cargoes begin to leave Gladstone in Queensland also builds a lot of upside into wet gas in the Cooper Basin.“For each one of those satellites, two thirds of the energy comes from the sales gas, with the balance from liquids. At current Australian market prices, liquids actually make up two thirds of the revenue, but we expect that to move to a 50/50 split given what we all expect to happen to gas prices in the eastern markets,” Lingo said.
The other major arm to the wet gas strategy is an innovative development plan for the liquids-rich Flax and Juniper fields, which Drillsearch acquired with the Acer takeover in 2013.Reservoir engineering studies with RISC have devised a development plan requiring up to nine horizontal wells with multi-stage fractures – a common configuration in North America but yet to be used in the Cooper Basin.“The studies suggest we can recover about 10MMbbl of oil and another 3MMboe of gas from Flax and Juniper using this development approach,” Lingo explained.“On a daily basis, we would produce up to 10,000bopd and 20MMcfpd. So can we actually produce at similar liquids rates to western flank? The answer is yes,” Lingo said.
Wet gas is not only the ace up Drillsearch’s sleeve in its quest to meet its guidance of doubled production over the next five years.The company is revisiting oil fields on the eastern margin of the Cooper Basin, where it hopes to replicate the remarkable success rates achieved on the western flank with 3D seismic.And then there is western flank itself, where the mighty Bauer field is producing more and better results, easily offsetting natural field decline.
Lingo is quick to point out that it is not just the 3D seismic, but Drillsearch’s emphasis on technical skills and capability that are helping unlock the prolific basin’s riches.“We have over 100 full-time personnel now. When I joined in 2009 we had more directors than we had employees and we couldn’t afford a dog,” he said.“But what we actually did was we realised we wanted to be a commercially astute but technically-driven organisation. “Today, 75% of our staff are technically focused – either geology and geophysical or field operational people – because the one thing you can’t change are the rocks.“And the one thing that I always put to our technical team are three questions – what can the rocks do, how do we get the most out of our rocks and are there better rocks?“In a simple way, that’s an expression of how we go about looking our footprint in the Cooper Basin.”
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