Another interesting hydrocarbons discovery in Western Australia has been confirmed, the second in the past month.
Yesterday, AWE revealed that further testing at an existing well north of Perth, near the Doingara and other fields, had uncovered what could be a major new onshore area of interest for gas.
In fact, AWE reckons the potential of the Senecio-3 well, being drilled with partner Origin Energy (ORG), could be the largest onshore gas discovery in 30 years.
Yesterday’s announcement confirmed a statement made at the start of the month which revealed that new gas bearing areas had been found in the well – over 700 metres deeper than expected.
The well had found gas in two known-producing formations higher up in the well (up to 2,670 metres), but further drilling and then analysis has confirmed additional gas bearing zones further down the well up to a depth of close to 3,400 metres.
The news lit a fuse under AWE shares, and they surged by close to 14% to end the day on $1.91.
AWE YTD – AWE shares spike on onshore gas find
AWE’s announcement follows the announcement a month ago of the potentially large oil discovery in the Canning Basin by Apache of the US, local tiddler Carnarvon and two other partners.
Apache said in an announcement that Phoenix South-1 well had struck a large area of oil in the well that could support a total reserve estimates of 300 million barrels.
That would make it one of the largest, if not the largest discovery in Australia in the past 20 years (since the Enfield oil strike almost two decades ago).
More work is being done on the data from the well and a second well planned for the area which is offshore from the WA Pilbara.
AWE revealed yesterday that Senecio-3 had found gas deeper down in its Senecio gas field in the Perth Basin.
The discovery was made deeper than existing known gas producing formations in the area.
Together, the Senecio and deeper Waitsia fields could hold 360 billion cubic feet of gas, and potentially as much as 1.17 trillion cubic feet of gas, AWE said on Thursday.
AWE said that could make it the biggest onshore find in the state since the Dongara field, and it was also looking at one or two areas of interest which could contain additional gas reserves.
The resources were foreshadowed by AWE when initial results from the Senecio-3 well were released earlier this month.
The discovery is close to existing gas processing plants and pipelines, meaning the resources could be brought into production relatively quickly, according to a statement from AWE managing director Bruce Clement.
The gas is classified as "tight", meaning it would require artificial stimulation to flow to the surface.
Mr Clement also said there was "substantial upside" to potential resources in the reservoir from unconventional gas in some levels of shale and coal at the site.
“We are now focusing on flow testing of Senecio-3 to establish commercial viability and the potential early, low-cost development of the Senecio and Waitsia fields,” he said.
AWE said it had cased and suspended the Senecio-3 well in preparation for conventional flow testing of multiple reservoir intervals in the Senecio and Waitsia fields later in 2014. Waitsia appraisal well is also under consideration for drilling in early 2015 immediately following the drilling of the Irwin-1 exploration well, 8 kilometresk east of Senecio.
The primary target for the Irwin prospect is the Dongara/Wagina sandstone but the well will also evaluate the deeper prospective horizons that have been high-graded by the Senecio-3 result.
"After initial analysis of data from the Senecio-3 well, and the existing 3D seismic, AWE estimates that the Kingia/High Cliff Sandstone intervals in the Waitsia Field have gross Contingent Resources in the range from 65 billion cubic feet (Bcf) to 1170 Bcf, with a best estimate of 290 Bcf,” AWE said in yesterday’s statement.
"The presence of a significant quantity of potentially moveable hydrocarbons is indicated by strong gas shows, petrophysical analysis and pressure data. Net to AWE, the combined Senecio and Waitsia fields represent a best estimate of 180 Bcf of gas.
"Further evaluation and appraisal will be required to more accurately define the size of the accumulation and the lateral extent of the conventional and tight gas bearing sands.
"It should be noted that the Kingia/High Cliff Sandstone interval has not been previously penetrated in this part of the basin and represents an exciting new play with significant upside and follow-up potential.
"AWE is also evaluating the gas bearing intervals in the Irwin River Coal Measures and Caryniginia Shale which could provide substantial additional unconventional resource potential.
"AWE estimates that the Irwin River Coal Measures has gross Prospective Resources in the range from 114 Bcf to 1497 Bcf, with a best estimate of 420 Bcf.
"The presence of a significant quantity of hydrocarbons is indicated by strong gas shows and petrophysical analysis but further evaluation and appraisal would be required to establish whether reservoir productivity will be sufficient for commercial development.
"At this stage, AWE currently estimates the chance of development at 20%. This risking will change with further appraisal activities."
"Prospective resources for the Carynginia Shale have not yet been estimated for this location, but could be substantial,” the company added in yesterday’s statement to the ASX.
