New gas options sought

As timing goes, the announcement that Alcoa of Australia and Latent Petroleum have joined forces to develop the Warro gas field was impeccable.

If proven to be commercially viable, the joint venture will develop Western Australia's first tight gas field and become a major gas supplier to the domestic market.

The joint venture was announced last Friday, just 10 days after the explosion on Apache Energy's Varanus Island gas plant cut a third of the state's gas supply.

It was the latest initiative by Alcoa, the state's largest consumer of gas, to find alternative supplies.

As well as investing in Warro, Alcoa has committed to fund ARC Energy's $40 million gas exploration program in the Canning Basin, in the state's north.

Other companies drilling in the Carnarvon Basin include Empire Oil & Gas, which also has exploration programs in other parts of the state.

The development of new gas fields would diversify Western Australia's supply.

About 90 per cent of the state's gas currently comes from the Woodside-operated Karratha gas plant and Apache's Varanus plant.

The only other significant source is the Perth Basin, near Dongara, where Origin Energy and ARC Energy are the major producers.

The Warro field, also in the onshore Perth Basin, has been known about for many years but in the past has not been commercially viable to develop.

The tripling of gas prices in recent years has renewed interest in the Warro development.

The field is located just 30km east of the Parmelia and Dampier-Bunbury pipelines and covers 7,000 hectares.

Latent operations director Brent Villemarette, a former gas reservoir manager for Apache Energy in Houston, said the field was about 4,200 metres below the surface, holding up to 5 trillion cubic feet (TCF) of gas.

Mr Villemarette said drilling was expected to start in October this year when a new rig will arrive from US-based Fortune Drilling.

If modern drilling technology can be applied successfully to WA, the Warro field could yield 3TCF of gas for domestic use.

During the life of the field, the joint venture could drill more than 200 wells to produce an average of about 100 million cubic feet of gas a day, catering for 10 per cent of the South West's needs.

"The situation now in WA is very real because the state has had to rely on very few gas fields," Mr Villemarette told WA Business News.

"Tight gas fields like Warro were never really viable in the past because we have these big offshore gas fields delivering large volumes. But now there's been a supply-demand cross."

Tight gas fields, like Warro, are common in other parts of the world, providing more than 20 per cent of the US domestic gas supply.

The gas is held in tight, or low permeability, sandstone reservoirs that don't naturally flow gas to the surface, so the rocks must be 'coaxed' through fracture stimulation to yield their gas.

The process works by injecting a specially engineered fluid or gel under high pressure into the channels of the low permeability reservoir to "crack" the reservoir and improve the gas flow.

Alcoa managing director Alan Cransberg said the current gas outage had reinforced the importance of finding new energy sources throughout the state.

"WA is experiencing a serious shortage of gas with commercially viable supply failing to meet the state's growing demand," he said.

"This has been exacerbated by the loss of supply from Varanus Island and reinforces the importance of progression in finding new energy sources."

The Varanus Island incident is the third major disruption to WA's gas supplies in four years.

In 2004, power cuts in the middle of a heat wave had the state on edge, as did the restrictions placed on electricity supplies in January this year after the Karratha gas plant shut down for two days.

Mr Villemarette said that with only two major natural gas fields in WA, the Carnarvon Basin in the north west and the Perth Basin, the prospect of drilling the Warro Gas Field could not have come at a better time.

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Public Companies - Resources

LabelValue
Fortescue Metals Group$8.44bn
Woodside Petroleum$6.03bn
Mount Gibson Iron$864.8m
Iluka Resources$856.3m
Atlas Iron$714.7m
Others$21.67bn
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