First Competitive License Round In 45 Years Sparks Exploration Revival In South Australia

The Moomba gas processing complex is the heart of oil and gas production facilities in South Australia's Cooper-Eromanga basin, where a revival in exploration activity soon will get under way. Photo courtesy of Primary Industries and Resources South Australia.

Tirrawarra oil field, the first Cooper basin oil discovery (1970), holds 80% of the oil found to date in the gas-prone Cooper-Eromanga basin of South Australia. Photo courtesy of Australian Institute of Petroleum Ltd.'s Petroleum Gazette. [32,668 bytes]
Cooper Basin acreage offering [196,173 bytes]

South Australia is about undergo a renaissance of exploration activity.

The gas-prone province of the Cooper basin and the overlying Eromanga basin in South Australia has long been dominated by Santos Ltd. and its joint venture partners. The Santos group has held a group of exploration and production licenses in the Cooper-Eromanga basin since 1954. As of Feb. 27, 1999, all of the non-producing exploration licenses held by the JV expired without right of renewal.

That led the government to seek applications for about 30 exploration licenses in the area, in three stages during 1998-2000. The first round opened in October 1998 and closed Mar. 11, 1999, for 11 blocks along the flanks of the Santos JV-held petroleum exploration licenses (PELs) 5 and 6. The second offering will cover core blocks in the Cooper-Eromanga basin, and a third offering is slated to close in 2000. As many as 31 blocks will be offered.

While the Santos-held producing blocks have seen extensive seismic coverage and drilling activity over the decades, the rest of South Australia has been only lightly explored for petroleum.

According to Primary Industries and Resources South Australia (Pirsa), large areas of the state's sedimentary basins offer significant oil and gas potential. Several of these areas have proven mature source rocks in association with suitable reservoir rocks in sequences ranging in age from Neoproterozoic to Mesozoic.

On the potential market side, existing contracts with the South Australian Cooper basin producers supply the state's natural gas needs to 2013 and those of New South Wales to 2006. New South Wales's principal natural gas distribution company, Australian Gas Light Co., has a contract in force for volumes below its full requirement projected for 2001-06.

South Australian gas demand is predicted to rise in the medium term with industrial and commercial expansion, even as the state and federal governments press efforts to introduce a competitive market for gas.

Offerings

In the first round of the Cooper-Eromanga basin exploration licensing initiative, 15 companies and/or groups submitted 41 bids.

Judging from those bids, companies will spend at least $45 million on exploration in the Cooper-Eromanga basin during the next 5 years. Successful bidders included U.S. independents Australia Crude Oil Co. Inc. (Blocks CO98-A, B, and D) and Liberty Petroleum Corp. (CO98-C) and Australian independents Stuart Metals NL (CO98-E and H), Tyers Investments Pty. Ltd. (CO98-F), Beach Petroleum NL 100% (CO98-G), Beach in partnership with Magellan Petroleum (CO98-I and J), and a combine of Strike Oil NL and Australian Gasfields Ltd. (CO98-K).

The licenses awarded under the first round carry a maximum of three 5-year terms.

The second round calls for offering eight blocks in the Cooper basin covering a total area of 6,000 sq km. These blocks, covering 440-1,070 sq km, abut existing oil and gas fields in the core of the basin (see map, above). It closes Nov. 25, 1999. Licenses awarded under the second round will be issued for 5 years and be renewable for one additional 5-year term following relinquishment of 50% of the acreage.

The third round, covering about 12 as-yet unspecified blocks, will open Jan. 20, 2000. This round will offer the remaining core acreage of the former PELs 5 and 6 and some flank acreage. Two closing dates apply: Bids for flank blocks will close on June 30, 2000; bids for core Cooper basin blocks will close on Sept. 29, 2000. Licenses are awarded on the basis of the most competitive work program.

Upon commercial discovery, production licenses (as are pipeline licenses) are awarded for 21 years and are renewable.

There is an extensive infrastructure in the Cooper-Eromanga basin, with 3,740 km of pipelines transporting Cooper-Eromanga natural gas, crude oil, condensate, and gas liquids to South Australia and New South Wales markets.

Cooper-Eromanga potential

Despite the long history of production in the Cooper-Eromanga basin, there remains significant untapped potential-just from an explorationists' standpoint and apart from the more than 40 discovered accumulations that remain undeveloped.

Pirsa estimates conservatively that at least 2 tcf of commercial gas reserves and 34 million bbl of oil reserves remain to be discovered in the Cooper-Eromanga basin.

Quoted in the Australian Institute of Petroleum Ltd.'s Petroleum Gazette, Pirsa Director of Petroleum Bob Laws said, "There is reasonable scope for new exploration work, because, based on well density, the areas outside the current production licenses have received only a ninth of the number of wells that have been drilled in the areas within the production licenses.

"What's more, there are a number of advantages for incoming explorers, including the established infrastructure and markets, proven play concepts, and access to detailed data."

Laws cited a recent Pirsa study that estimates that a Cooper basin gas field containing more than 25 bcf of recoverable gas is likely to be economic on a stand-alone basis, even if LPG must be recovered or flared; one containing 10-25 bcf is economic only if flaring is allowed; and one containing less than 10 bcf is economic only with access to existing facilities (in which case the LPG would be recovered).

What's significant about this study's conclusions, Laws said, is that many recent Cooper basin discoveries have been about 5-10 bcf.

"That seems likely to continue for gas in conventional structural traps, so the presence of infrastructure access agreements should enhance the development potential of any finds in the (released) licenses and encourage the entry of new players to the region," Laws told the Petroleum Gazette.

Regional geology

Sediments in the Cooper basin are primarily Carboniferous-Permian-Triassic, overlain by the Jurassic and Cretaceous sediments of the Eromanga basin. Underlying the Cooper basin are the early Paleozoic sediments of the Warburton basin.

Blocks closest to Cooper basin production, to the south and northeast, also have overlying Eromanga sediments. But the blocks to the north and west are likely to have their targets in Eromanga and Warburton sediments that extend beyond the rim of the Cooper basin.

Permian coal seams and associated shales containing terrestrial organic matter are the source of Cooper basin oil and natural gas. Cooper oil ranges from a light condensate to a waxy oil with depleted light hydrocarbons.

Explorationists have had their greatest success in the Cooper basin with anticlinal and faulted anticlinal traps. In both Cooper and Eromanga sequences, there remains significant potential in stratigraphic and sub-unconformity traps.

According to the Petroleum Gazette, "Vertical migration of oil from Permian (Cooper basin) source rocks has been widely accepted as the principal source of most oil found so far in Eromanga reservoirs."

That view leads to the assumption that this Permian-sourced oil has not laterally migrated, so it follows that much Eromanga exploration has focused within the Cooper basin or close to its margins.

"However, new organic research indicates that there are potential source rocks of Jurassic and Cretaceous age, and there is evidence that oil can, indeed, migrate for long distances," the Petroleum Gazette reported. "Nevertheless, there is still doubt over the extent and relative contribution of petroleum in the Eromanga reservoirs derived from this source. The older Simpson and Pedirka basins, underlying the Eromanga basin to the north and northwest, also contain mature source rocks and may also contribute to Eromanga reservoirs."

Most Eromanga traps are structural, including anticlines with four-way dip closure or drapes over pre-existing highs with a stratigraphic component.

Nappamerri trough

There is also significant gas potential in the Nappamerri trough, one of three major structural Permian troughs in the Cooper basin.

Nappamerri reservoirs are deeper, tight sands features that have proven problematic for Santos and partners, which have spent about $45 million in the trough since 1993 to drill eight wells-all of which found gas, but only one of which is currently considered likely to be commercial.

The Santos group is conducting studies and field trials of tight gas technology in several areas of the Cooper basin, where it has pledged to spend at least $100 million to explore the Nappamerri trough-about half of that by 2003. Following relinquishments in 2003, 2008, and 2013, Santos must relinquish all Nappamerri trough acreage that is not proven or producing.

And that could mean another round of opportunities for explorationists in South Australia.