Oil finds fire Perth Basin heat

Once thought to contain only gas, the oil exploration renaissance in the Perth Basin continues with a hive of activity capturing market attention. Alison Birrane reports.

PERTH-BASED junior oil and gas companies could be stocks to watch as exploration continues in the highly prospective Perth Basin.

With drilling programs underway and others set to commence in coming months there is increased interest in the Perth Basin activities of local producers such as Arc Energy and Voyager Energy.

Other companies with significant joint ventures in the Perth Basin include Origin Energy and Roc Oil, while juniors such as Bounty Oil and Gas NL, Victoria Petroleum, Norwest Energy NL are smaller players.

Covering about 100,000 square kilometres along the south west coast of Western Australia, the Perth Basin was once thought to be only gas prone, however, oil discoveries at Hovea and Cliff Head in 2001, followed by discoveries at the Jingemia and Eremia fields has sparked new exploration activity.

Hovea was the first onshore oil field discovery while Cliff Head, south of Geraldton, was the first offshore oil field found in the Perth Basin.

Cliff Head has estimated reserves of 20 million barrels of oil, which has raised interest in the area.

In 2003 producing fields included Dongara, Woodada, Mount Horner, Beharra Springs and Yardarino and Hovea.

However, petroleum prospectivity has been demonstrated both onshore and offshore.

This activity is marking the basin’s revival as a highly prospective oil and gas region, with state-of-the-art technology contributing to exploration efforts.

According to stockbroker Hartleys’ research eight commercial hydrocarbon fields have been discovered in the North Perth Basin, of which Dongara is the largest.

Additional smaller discoveries have been made in the northern and southern parts of the basin.

Further, the proximity of the Perth Basin to petroleum industry infrastructure, including two major gas pipelines, trucking facilities and an oil refinery in Kwinana are contributing to the attractiveness of the basin as a producing region.

Hartleys head of research Kevin Tomlinson said while the exploration of the Perth Basin was still in its infancy, there was significant scope for further oil discoveries.

However, he said while some early drilling programs were unsuccessful, other significant discoveries, such as Cliff Head were creating market interest.

“It’s fair to say that because of the unsuccessful wells investors are cautious, however, as drilling moves onto site this is likely to change,” Mr Tomlinson said.

Voyager Energy technical director Ray Barnes said the company had the largest spread of acreage in the Perth Basin with both onshore and offshore assets with interests in the Cliff Head and Jingemia-4 with ARC Energy and others.

This week Voyager secured a production license from the WA Government for the Jingemia oil field.

In a statement announcing the approval, the company said completion of the transaction with ARC Energy to increase the company’s equity in the Jingemia–4 oil development located in the onshore Perth Basin EP 413 project from 6.27 per cent to 11 per cent was imminent.

Voyager is also in the process of upping its stake in Cliff Head to 6 per cent as well as taking bigger shares in a number of nearby permits.

The company will fund the acquisition through a $2.6 million placement at 24 cents a share and an $11.2 million renounceable rights issue at 20 cents a share, fully underwritten by Hartleys.

Jingemia-4, which is onshore south of Dongara, is being prepared for commercial oil production by July.

The participants in EP 413 are operator Origin Energy Developments (49.189%) along with, Hardman Oil and Gas (22.376%), ARC (15.495%) Voyager (6.270%), Victoria Petroleum (5%), Norwest Energy (1.278%), Roc Oil (0.250%) and John Kevin Geary (0.142%).

Mr Barnes said this year was an important one for the basin, with drilling programs being finalised.

“In the exploration down towards Cliff Head, we are looking to drill up to three or four wells,” he said.

“In the third or fourth quarter, we anticipate that we will begin drilling, mostly around Fiddich.”

ARC Energy has also recently increased its interests in the Perth Basin, buying out Hardman Resources’ assets in the Perth Basin for $9 million in March and paying $16 million for the Perth Basin assets of Australian Worldwide Exploration.

ARC managing director Eric Streitberg said the deals consolidated the company’s Perth Basin position.

It has interests in all producing fields in the basin including the supporting infrastructure and is focusing on the onshore areas.

“In some respects I think that the renaissance in the Perth Basin has been coming in for two years since Hovea was found and we’ve basically been going from strength to strength,” Mr Streitberg said.

“Onshore, the prospectivity for the basin is very high. We’ve just started to drill for gas again.”

Origin is another company with major interests in the Perth Basin as the operator of the WA-226-P joint venture.

The company is preparing to drill a well on the 100 million barrel potential Fiddich prospect as early as May this year.

Meanwhile, Roc Oil drilled two successful appraisal wells near Cliff Head in early 2003 and in October 2003, a 3D seismic survey was acquired of the field.

Should it proceed, the company hopes the Cliff Head Oil Field will establish the offshore Perth Basin as Australia’s fourth offshore oil producing region following the Bass Strait, the North West Shelf and the Timor Sea.

In October 2003 the Cliff Head Oil Field was declared commercial-in-principle and a preliminary development plan and application for a location were submitted to Government in December 2003.

Front-End Engineering and Design studies are in progress and a final investment decision is expected in the third quarter this year.

Roc Oil chief operating officer Bruce Clement said the development concept was being finalised.

Mr Clement said the concept includes an unmanned offshore production platform that will pipe to an onshore processing facility, where power generation, processing and storage will be located.

He said export was likely to be via truck to the BP Kwinana refinery or by truck to Geraldton for shipping.

However, while interest increases in the Perth Basin activities, Australian Petroleum Production and Exploration Association (APPEA) spokesman Don Sanders said approvals processes, including legislative, safety, environmental and Native Title were hindering exploration in the Perth Basin.

“As a result, companies are disincentivised and we have a stalling of projects which is in the State’s interests to progress in terms of revenue streams,” he said.

Mr Sanders said increased oil and gas activity in the Perth Basin was contributing to local communities.

“We’ve seen a town like Dongara thrive due to the oil and gas industry,” he said. “From feedback to the amount of local content that we’ve seen in a town like Dongara, it diversifies their opportunities from existing industries like fishing.”