Australia Promoting Offshore As Prime E&D Focus

The Modec Venture 1 floating production, storage, and offloading (FPSO) vessel is shown en route to the Elang-Kakatua complex in the Timor Gap area jointly administered by Australia and Indonesia. The FPSO has been leased to a group led by operator BHP Petroleum Pty. Ltd. for the life of the fields. Recent successes in the Timor Gap area have contributed to an overall surge in interest in Australian offshore exploration and development. Photo courtesy of Australian Institute of Petroleum Ltd.'s Petroleum Gazette.

Where Australia will offer offshore acreage in 1999 [930,584 bytes] (Figure 1)
Offshore Australia exploration maturity [233,970 bytes] (Figure 2)
Australia is promoting its offshore sector as the primary focus of exploration and development opportunities in years to come.

While some onshore opportunities remain, such as in the Cooper-Eromanga basin (see related article, p. 52), there is little doubt that Australia is continuing to evolve as a mainly offshore play.

An analysis of patterns of exploration and discovery in Australia suggests the future for explorationists interested in Australia lies offshore (see related article, p. 37). In fact, it can be said that this future is evolving as a dichotomy: While Australia's offshore sector has been producing for several decades and is showing some signs of a maturing province, similar to the U.K. North Sea, there remain vast expanses of Australian waters that remain virgin-especially the deepwater theater, which is heating up elsewhere in the world.

This sort of dichotomy presents itself as a circumstance in which the government offers fresh incentives to explore major frontier basins, while at the same time a 1968 discovery (Legendre) can get another look that results in a new commercial development plan.

The renewal of interest in Australian E&D is propelled by a recognition by the government of the country's dwindling crude oil reserve base (about 12 years of reserves life at current rates of oil, gas, condensate, and gas liquids production) and a recognition by industry of this huge untapped potential. Adding to the impetus for Australian E&D is an array of export-based liquefied natural gas projects that a number of companies are promoting-many of them in a proposed LNG marketing joint venture (OGJ, Apr. 19, 1999, p. 38)

This convergence of interests has resulted in recent record levels of exploration activity. After a record number of oil and gas discoveries in 1997, companies in 1998:

Spent $1.055 billion (Australian) on Australian exploration, with the offshore sector accounting for 78% of that total.
Conducted a record level of seismic surveys totaling 85,000 line-km, with 95% of the data acquired offshore.
Drilled 168 exploratory wells, including a record 74 offshore exploratory wells (44% of the total). Of this total, 58 were rank wildcats drilled offshore (95% of them off Northwest Australia), and 71 were rank wildcats drilled onshore (88% of them in South Australia and Queensland).
Drilled a record number of total petroleum exploration wells in first half 1998.
Made significant new field discoveries at Gipsy, Peck, Sunset West, Legendre South, Caspar, White Ibis, Rose, John Brookes, Vincent, and Chuditch, for an overall success rate of 17% (26% in the Carnarvon basin, 11% in the Bonaparte and Browse basins).

Australian potential

Australia's potentially petroliferous sedimentary basins are extensive, including a continental shelf that is more than twice the land area of the continent itself.

Australia has proclaimed a 200-mile exclusive economic zone (EEZ) around its territory and will claim a further 3.3 million sq km beyond the EEZ before 2004.

Yet the nation that is also a continent has seen, relatively speaking, only a modest amount of exploration and development activity.

According to Australia's Department of Industry, Science, and Resources (DISR), only about 7,400 petroleum exploration wells have been drilled in Australia to date-compared with about 3 million in the U.S.-and only 1,100 of those were offshore. Only 1,671 wells of all types have been drilled off Australia.

Australia's exploratory drilling coverage has averaged 1 wildcat/20,000 sq km, a density achieved by the U.S. in the late 1860s.

Currently, about 90% of Australia's oil and gas is produced from offshore fields-in the Bass Strait, Timor Sea, and North West Shelf.

The Australian Geological Survey Organization (AGSO) estimates that there is a 50% chance of finding another 3.06 billion bbl of crude oil and condensate onshore and offshore. AGSO cautions that, given the limited data available for many basins, these estimates are likely to prove conservative.

The organization has classified the offshore regions into mature, submature, immature, and frontier (see map, p. 48).

Mature regions are those with a greater than 50% probability that more than 50% of the total petroleum in the region has been discovered. These areas are generally covered by extensive seismic grids (an average grid spacing of less than 2 km, with some 3D) and have a high drilling density (more than 10 exploration wells/1,000 sq km).

Submature regions are those with a greater than 50% probability that 20-50% of the region's total petroleum resource has been discovered. Here, average seismic grid spacing is likely to be 2-5 km, with some 3D; drilling density is 1-10 exploration wells/1,000 km.

Immature regions have a greater than 50% probability that less than 20% of the total petroleum in the region has been discovered. In such regions, average seismic grid spacing is likely to exceed 5 km, and only 1 exploration well/1,000 sq km has been drilled.

Frontier regions are those without petroleum discoveries, where seismic coverage is sparse and few, if any, wells, have been drilled.

Offshore strategy

In June 1998, Australia's federal government unveiled a number of reforms to improve the administration of offshore petroleum exploration and development in Australia.

Included in the reforms was the development of a revised strategy to bolster future oil and gas exploration in Australia's offshore sector during the next 5-10 years. DISR Minister Nick Minchin said the strategy "will create more certainty in the acreage release process and give industry more lead time in considering areas for future release."

In addition, the new strategy provides for improved availability of exploration data and reiterates the government's commitment to ensure that the country's regulatory and fiscal regime remains competitive internationally. According to a 1998 survey by Robertson Research Ltd., Australia ranks second in favorability for oil and gas investment among countries worldwide outside North America-the country's highest ranking in the 12 years of the survey.

Generally, the new offshore strategy calls for:

A new offshore exploration acreage release program that recognizes the increased level of interest in Australian exploration and implements a revised approach to delimiting the size of areas offered for bidding. Henceforth, offerings will consist of a maximum of 80 blocks in frontier regions, 40 blocks in immature regions, 20 blocks in submature regions, and 8 blocks in mature regions.
Improved access for explorers to low-cost geological and geophysical data. In 1998, the government launched an initiative to further this effort: the National Petroleum Information Strategy, which is designed to link all open-file data repositories, data sets, and indexes into a national data set in a site on the Internet. At the same time, efforts are under way to establish standards to maintain data integrity.
An enhanced program of regional geophysical work to be undertaken by AGSO. Under another 1998 initiative, the government disclosed a $33.3 million, 4-year boost to AGSO's program to identify prospective new oil zones in Australia's offshore frontiers, notably through non-exclusive seismic surveys.
Progressive reform of the regulatory framework for petroleum exploration and development in offshore areas. The federal, state, and territorial governments are implementing reforms announced in 1998 that entail: accelerated progress toward objective-based co-regulation, with rules developed in consultation with industry; joint development of protocols by these governments to define and provide clear guidelines for roles and responsibilities; a review of shared and delegated administrative responsibilities, with the aim of delegating some shared powers to the states and Northern Territory; and regular audits of those guidelines and protocols to ensure consistency across jurisdictions. Other reforms involve planned amendments to existing offshore petroleum legislation, including ones to deal with title security matters and the recent boundary delimitation treaty with Indonesia.
Support for other policies that enhance Australia's competitiveness in attracting investment in an increasingly competitive environment. Regarding the Petroleum Resource Rent Tax (PRRT), Australia has tried to resolve uncertainty regarding the valuation of PRRT-liable gas used as feedstock for vertically integrated liquefaction plants by introducing a gas transfer price where arm's length market outcomes are absent. Australia also concluded comprehensive tax agreements with a number of countries to eliminate double taxation. And the government is expected to release a report before July 1, 1999, of its major review of business taxation, which got under way in 1998. New legislation to implement the review's recommendations is expected to take effect July 1, 2000. Other reforms are expected in the environmental assessment process, native title process, and special fast-tracking procedures for permitting major projects (total capital outlays of more than $50 million).

1999 offering

The latest offshore petroleum exploration acreage release covers 57 areas available for work program bidding.

The areas offered and their closing dates, both shown in the map on p. 00., are described by DISR and AGSO as follows:

Great Australian Bight. This 225,000 sq km region, in water depths of 60-4,500 m, includes the Eyre and Ceduna sub-basins of the Bight basin, as well as the Duntroon basin. The result of break-up and separation of Australia and Antarctica from the late Jurassic onwards, this area offers petroleum potential in rift and ensuing drift stages. Up to 10,000 m of continental to marine, Mesozoic to Cenozoic sediments are present. There is control from only two wells in the Bight basin areas; the greatest sediment thicknesses are in water depths of greater than 500 m and have not been drilled. Six wells have been drilled in the two Duntroon areas offered, with significant oil shows in Greenly-1. Current studies of well and seismic data, including recent surveying, indicate the potential for hydrocarbon charge, as well as structural and stratigraphic plays and the large traps necessary for exploitation in this region.
North West Shelf. Forty-five areas, ranging in size from about 80 sq km to about 10,000 sq km-and in exploration status from mature to frontier-are offered along the length of the North West Shelf. In the Barrow and Dampier sub-basins of the Carnarvon basin, areas are offered near the recent Woollybutt oil and John Brookes gas discoveries, as well as near producing fields. Targets are Jurassic to Cretaceous deltaic and marine sands. In the south, areas with limited exploration data straddle the boundary of the Paleozoic Gascoyne and Mesozoic Exmouth sub-basins, south of the recent Vincent oil strike. In the central part of the North West Shelf, the offering fills in acreage in coastal to deepwater areas in the Browse, Roebuck, and Canning basins. Most of these have had limited exploration, but there are new, non-exclusive seismic and reprocessed seismic data sets over much of the region. Areas on offer flank the supergiant Scott Reef gas field, the offshore extension of the Fitzroy trough and its flanking highs, the Rowley sub-basin northeast areas that attracted considerable interest in the previous release, and the undrilled margin west of the Browse basin. There are proven and potential Paleozoic and Mesozoic systems in the basins. In the northern part of the North West Shelf, in the Bonaparte basin, one area on offer in the Vulcan sub-basin lies between Skua and Montara oil and gas fields. Two areas overlie the major Mesozoic depocenter of the Malita graben and its flanks, offering a range of plays.
Southeastern margins. A single area of about 7,200 sq km covers the Mesozoic-Tertiary depocenter of the Otway sub-basin southwest of Melbourne. Plays will center on half-grabens, with fault-block, onlap-drape, and hanging-wall fault traps and with source units including organic-rich lacustrine sediments. In the Gippsland basin, limited acreage is available, with a single area offered that overlies the southern part of the central deep and adjacent terrace. It includes two sub-commercial gas and oil discoveries, and leads have been mapped on good seismic coverage. In the Bass basin, the western flank is offered as three areas. These are immediately west of oil and gas discoveries. The most likely scenario for petroleum discoveries is post-Miocene generation from Cretaceous source rocks into Paleocene and older reservoirs in pre-Oligocene traps. All of these areas are near Australia's main population centers and related gas distribution infrastructure.
Northern Australia. Northeast of Darwin, four areas are on offer in the Arafura and Money Shoal basins.
Here, thick Paleozoic carbonate and clastic rocks in the northwest-trending Goulburn graben and overlain unconformably by (possibly) Jurassic, Cretaceous, and younger sediments. There is evidence of hydrocarbon generation from the Paleozoics and potential reservoirs include Ordovician dolostones and a basal Cretaceous channel sand system overlying the northern fault of the graben.