24/07/2017 - 15:18

Jockeying for position in Perth Basin

24/07/2017 - 15:18


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SPECIAL REPORT: Only a small number of oil and gas players in the Perth Basin are moving forward on projects.

Jockeying for position in Perth Basin
Rob Towner says the ownership structure in the Perth Basin is quite diverse. Photo: Attila Csaszar

Cottesloe-based Triangle Energy has been busy since it bought AWE's share of the Cliff Head oil field off the coast near Dongara last year, upping its stake in the venture and seeking new liquids nearby to lift utilisation.

Triangle Energy is among a number of players in the Perth Basin building momentum in a tough market, with Norwest Energy, AWE and Key Petroleum also taking steps forward on projects.

For Triangle Energy, the drilling of the offshore Xanadu prospect in late September will be just one opportunity to find oil near Cliff Head, according to managing director Rob Towner.

Xanadu is operated by Northbridge-based Norwest Energy, with Triangle to contribute 40 per cent of drilling costs to earn a 30 per cent interest in the project.

The field is close enough to shore to be accessed through an onshore well.

"It's strategically important for us in extending the life of our infrastructure (the Cliff Head platform and Arrowsmith processing facility) that we've purchased," Mr Towner told Business News.

Triangle holds 79 per cent of the Cliff Head oil field after buying out former partners AWE and Roc Oil for $5.1 million

The company had made some significant cost savings at the 10-year-old project since taking control, Mr Towner said, reducing cash costs around a third and renegotiating oil transportation contracts, while the associated processing facility at Arrowsmith was operating at about 10 per cent of the 15,000 barrels-a-day capacity.

The cost cutting and spare capacity have provided Triangle Energy with a valuable opportunity, according to Mr Towner.

"Any further oil discoveries, be it onshore or offshore, create a fairly good situation of utilising that existing infrastructure," he said.

It's likely to be several years before Xanadu starts production, according to Norwest Energy chief executive Shelley Robertson, with the company's permit renewal due in May the main focus.

"What we'll be doing after (the well) is actually preparing the next five year work program for the permit," Ms Robertson told Business News.

"Regardless of outcomes of this well, Xanadu is a very large structure, so there's definitely more potential to drill in other parts. I expect our next step would be to do some 3D seismic."

Norwest is free-carried by its partners on the first Xanadu well, Ms Robertson said, with the company needing to find more capital for any further drilling.

According to Mr Towner, there are further opportunities in the Perth Basin for his company beyond Xanadu.

"We believe the whole basin is underexplored," he said.

"The current structure of ownership could be said to be quite diverse; we are looking internally at what those potential changes might be, nothing yet that we can say today."

One interest, Mr Towner said, would be in the Mt Horner onshore oil project, which Key Petroleum recently bought from AWE and where it is proposing to restart production.

Holding a key

Key Petroleum managing director Kane Marshall said he had spent the past 18 months compiling the right portfolio for the Nedlands-based company, in part because he knew there may be a moratorium on fracking imposed after the March state election.

"It's probably a process of one to two years just to undertake transactions to diversify your portfolio, and if you don't start that process early you can get caught out," he said.

"Certainly when things turn around for the better they happen very quickly; the oil price can be back at $60/$70 a barrel within a few months, particularly if global demand picks up as most of the commentary has focused on supply.

"Even though we're a small company, we've got to be thinking longer term, particularly if we're going to deal with the larger companies and pick off non-core assets, which may not have material value to them but certainly do for us."

Mr Marshall said the company's market capitalisation had roughly tripled in a few months, to $14 million, because people could see a clear strategy.

The major element of the Mt Horner deal is that Key is being paid up to $1.9 million to assume the environmental liabilities involved in cleaning up the facility once it ends its operating life.

Mr Marshall said Key's cost base was a lot lower than that at AWE.

"So we are comfortable with this provision and we believe there is plenty of blue sky left in this part of the basin for future joint venture participation," he said.

Mr Marshall said Mt Horner was commercially viable, had near-field exploration potential and that other parties had expressed an interest in being involved in the project, with Key having a good track record of looking after capital and its partners in projects.

Waitsia capacity

After exiting the late-life Cliff Head and Mt Horner projects, Sydney-based AWE is currently drilling a fourth and final appraisal well at its Waitsia gas project.

AWE chief executive David Biggs said the results so far had been positive, with the company likely to make an investment decision on stage two of the Waitsia project, to lift capacity from 10 terajoules a day to 100tj/d, by the end of the year.

That represents about 10 per cent of the WA domestic gas market.

Such an expansion would involve a capital investment of up to $300 million, not including well drilling, Mr Biggs said, with the company currently undertaking front-end engineering work while it secured sales contracts for the gas.

The company was still mulling whether such a facility should be owned outright or if it would be preferable to pay a tariff to another company under a build-own-operate model, he said.

The nearby Lockyer Deep prospect might bring opportunity for Claremont-based Empire Oil & Gas.

Empire has had a recent leadership change, with Angus Walker replacing Ken Aitken as chief executive with a mandate to raise funds for exploration.


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