MinRes casts eye to oil after ‘exceptional’ gas hit

Mineral Resources has hailed the latest results from its Lockyer gas project in the Perth Basin as the highest quality in the region, as it turns its exploration attention to the region’s oil potential.

A sidetrack drilled off the L-5 development well at Lockyer intersected 27 metres of net gas pay with an average porosity of 18 per cent in Kingia sandstone, the region’s host geological formation.

“This is the highest quality reservoir encountered in all wells that have intersected the Kingia sandstone across the onshore Perth Basin,” MinRes said in a statement to the ASX this morning.

The company plans to drill a test well early in April, which will evaluate gas flow rates and composition from the reservoir.

L-5 is the fourth of 10 development wells planned by MinRes this year at the Lockyer project.

It follows Norwest Energy’s Lockyer Deep-1 discovery in September 2021, which hit 32 metres of net gas pay at an average porosity of 15 per cent.

MinRes acquired Norwest in the early months of 2023, and made the North Erregulla Deep-1 discovery in June last year when it hit 33 metres of net pay at 16 per cent average porosity.

That was followed by the Lockyer-3 well a month later, which intersected 11 metres of net pay at 13 per cent average porosity.

The latest drill results come days after MinRes’ application to the state to build an $850 million gas plant at Lockyer was detailed, and opened for public consultation through the Significant Development Assessment Unit pathway.

The project’s development hit a stalemate since late last year, when MinRes opted to delay a final investment decision pending clarity over the state government’s stance on LNG exports from onshore projects in the basin.

Premier Roger Cook has previously indicated a willingness to change the policy if it incentivises regional development, despite opposition from the state’s major industrial gas users.

A gas policy decision is expected in the first half of this year, with the final report from an inquiry into the state’s domestic gas policy scheduled to be tabled in June.

Meanwhile, MinRes has moved its drill rig on to the North Erregulla-2 well, which will test the quality of 47 metres of net oil pay intersected in the Dongara-Wagina sandstone by the NED-1 well.

Analysis of oil recovered in NED-1 generated what MinRes describes as promising indicators of high-quality oil.

“The NE-2 pay zone will be fully cored, followed by a full suite of wireline testing and a flow test to further define and unlock the considerable oil potential in the region,” MinRes said.

MinRes has previously outlined a plan to seek out a partner to develop oil at Lockyer, in a move it hopes will cut fuel costs at its iron ore projects, including Onslow, where the company is targeting production by the middle of the year.

In an investor call in February, managing director Chris Ellison said there was an “awful lot of oil” in the region and that the company expected to be selling oil “for the next 20 years”.

“I know it’s not a great thing, but if I had said it twenty years ago everyone would have been pretty happy,” he said.

MinRes shares were trading down 2.15 per cent around 9am this morning, at $68.20 per share.