19/07/2010 - 12:04

Alcoa, Transerv $20m deal on Warro gas

19/07/2010 - 12:04

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Alcoa Australia and Transerv Energy have reached a $20 million agreement for Alcoa to fund exploration at the Warro gas field 130 kilometres south-east of Dongara.

Alcoa, Transerv $20m deal on Warro gas

Alcoa Australia and Transerv Energy have reached a $20 million agreement for Alcoa to fund exploration at the Warro gas field 130 kilometres south-east of Dongara.

The operator of Warro 3 and 4, Latent Petroleum has started work to secure a rig to drill Warro 4 and is finalising plans and approvals for a 3D seismic survey.

The field is estimated to host up to 5 trillion cubic feet of gas (tcf). That is equivalent to reserves at Woodside's Pluto LNG project.

Last year, the Warro-3 well produced a commercial gas flow rate of 5 million cubic feet per day before water from an underlying aquifer entered the well.

 

See full company statement below:

The Board of Transerv Energy is pleased to confirm that Alcoa of Australia has formally committed to funding the Warro 4 appraial well and a 3D seismic program, which are now expected to commence late this year. The operator, Latent Petroleum, has started work to secure a rig to drill Warro 4 and is finalising plans and approvals for the 3D seismic survey.

Recent positive developments in analogous tight sand plays in the US provide increased confidence that Warro will be commercialy successful and guidance for improved fraccing techniques and well planning for these play types. The Warro partners are working closely with US tight gas experts to tap into the latest knowhow, and how best to apply it to Warro.

A recap on the Warro 3 well

-Warro 3 was a vertical well drilled from February to April 2009, and completed with an initial 7 stage frac and a follow up 2 stage frac.
-A flow rate of 5 mmcfpd was achieved for a 7 hour period from frac zones 3 to 6 prior to water breakthrough. As a result, it is apparent that commercial gas flow rates can be achieved by fraccing the Warro sands. After 7 hours, substantial water inflow to the well inhibited the gas flow rate, which was reduced to 1 mmcfpd.
-Warro 3 was deliberately located in an area of intense natural fracturing (this is common practice as the natural fractures in tight sands can augment the flow rate). It appears that a large natural fracture connected Warro 3 (post frac) to an aquifer, probably located approximately 50m above the target zones. The Warro 3 well was not designed to deal with water, so the water entered the well bore and inhibited gas flow.


Technical evaluation post Warro 3 is highly positive

-Warro 3 produced substantial new data for the play. Following the well the Warro partners commissioned renewed and detailed technical evaluation by the Discovery Group and Ely ad Associates, US experts in tight gas projects.
-Based on this evaluation, the Warro project is considered likely to flow gas at commercial rates, with the principal challenge being management of any water flow to the well bore.
-The experts emphasised that there are numerous successful tight gas plays in the USA that flow significant water, however, well plans and completions are specifically designed to deal with the water. Also, there has been substantial improvement in fraccing techniques in analogous tight sand plays in the USA (see below). These new techniques have resulted in significantly improved flow rates for similar play types.

ALCOA COMMITS TO FUNDING OF WARRO 4 WELL AND 3D SEISMIC PROGRAM

The Board of Transerv Energy is pleased to confirm that Alcoa of Australia has formally committed to funding the Warro 4 appraial well and a 3D seismic program, which are now expected to commence late this year. The operator, Latent Petroleum, has started work to secure a rig to drill Warro 4 and is finalising plans and approvals for the 3D seismic survey.

Recent positive developments in analogous tight sand plays in the US provide increased confidence that Warro will be commercialy successful and guidance for improved fraccing techniques and well planning for these play types. The Warro partners are working closely with US tight gas experts to tap into the latest knowhow, and how best to apply it to Warro.

A recap on the Warro 3 well

-Warro 3 was a vertical well drilled from February to April 2009, and completed with an initial 7 stage frac and a follow up 2 stage frac.
-A flow rate of 5 mmcfpd was achieved for a 7 hour period from frac zones 3 to 6 prior to water breakthrough. As a result, it is apparent that commercial gas flow rates can be achieved by fraccing the Warro sands. After 7 hours, substantial water inflow to the well inhibited the gas flow rate, which was reduced to 1 mmcfpd.
-Warro 3 was deliberately located in an area of intense natural fracturing (this is common practice as the natural fractures in tight sands can augment the flow rate). It appears that a large natural fracture connected Warro 3 (post frac) to an aquifer, probably located approximately 50m above the target zones. The Warro 3 well was not designed to deal with water, so the water entered the well bore and inhibited gas flow.


Technical evaluation post Warro 3 is highly positive

-Warro 3 produced substantial new data for the play. Following the well the Warro partners commissioned renewed and detailed technical evaluation by the Discovery Group and Ely ad Associates, US experts in tight gas projects.
-Based on this evaluation, the Warro project is considered likely to flow gas at commercial rates, with the principal challenge being management of any water flow to the well bore.
-The experts emphasised that there are numerous successful tight gas plays in the USA that flow significant water, however, well plans and completions are specifically designed to deal with the water. Also, there has been substantial improvement in fraccing techniques in analogous tight sand plays in the USA (see below). These new techniques have resulted in significantly improved flow rates for similar play types.

Tight gas plays generally

-There is growing recognition world‐wide of the value of tight gas plays, comprising tight sands, coal bed methane and shale gas. The coal bed methane boom is well known in eastern Australia. In the USA the boom in shale gas and tight sands is even larger.
-The advent of horizontal wells and improved fraccing and completion techniques has dramatically improved the economics of theseplays, assisted by generally higher energy prices. The refinement of these techniques has come a long way, even in recent years.
-Once the correct drilling and completion techniques for a play are established, they can be replicated over hundreds or thousands of well locations unlocking a large known gas resource. The size of the resource is usually very large because the gas is trapped (tight) throughout the whole formation, whereas conventional plays rely upon less frequent and less predictable traps of mobilised (free flowing) gas.
-Some of the largest oil and gas companies in the world have recently paid billions of dollars to buy into tight gas plays in th USA and eastern Australia.
-It is now estimated that there is more than 1,000 TCF of potential gas production from tight gas plays the USA, which currently contribute almost 50% of the total US domestic gas market of 19.4 TCF per annum. Tight gas has reversed a long decline in US domestic reserves of hydrocarbons.

Summary

Transerv is delighted with Alcoa's commitment to the next stage of the Warro program, covering both an appraisal well and an extensive 3D seismic program. Warro is a large, known onshore gas resource located close to Perth. Recent developments in analogous play types in the USA dramatically improve the confidence of Warro being commercially succesful. Transerv looks forward to this knowhow being successfully applied in the Warro 4 appraisal well to be drilled later this year.

 

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