Rick Wilkinson
OGJ correspondent
MELBOURNE, Dec. 22 -- Nexus Energy Ltd. signed a conditional contract with Santos Ltd. for gas from Nexus' Longtom field in Bass Strait to be processed through Santos's Patricia-Baleen plant near Orbost in East Gippsland, Victoria.
Santos will purchase the processed sales gas for injection into the main Longford-to-Sydney East Gippsland pipeline.
The agreement, which provides for processing of up to 350 petajoules of gas over 10 years, is conditional on sufficient reserves being proved at Longtom with appraisal drilling in mid-2006.
Longtom was originally found by Esso and BHP in 1995 but was relinquished because the Bass Strait partnership had abundant gas reserves in other fields.
Nexus acquired the permit (Vic/P54) several years ago and farmed out 62.5% to Perth-based Apache Energy Australia just prior to the drilling of Longtom-2 in 2004. This appraisal confirmed the gas discovery, but a second drillstem test failed to flow gas to surface.
Apache lost interest even though Nexus had independent corroboration that the test failed because of mechanical problems with valves in the drillstring. Apache stepped out of the farm-in agreement for the field but retains its interest in the surrounding exploration area, and Nexus resumed a 100% interest in Longtom.
A report for consultants Gaffney Cline & Associates earlier this year suggested Longtom had gas reserves of 193-435 bcf of sweet gas with little condensate.
A Longtom-3 appraisal well is now earmarked for mid-2006.
If the new well confirms the potential, first gas could be brought on stream via the Patricia-Baleen system in 2008.
The dry gas would suit the configuration as Patricia-Baleen field gas located some 20 km northeast of Longtom is also dry. Longtom gas would be sent via a 14 km undersea pipeline to intersect the Patricia-Baleen to shore trunkline.
Nexus would pay a toll to Santos (which has 100% of Patricia-Baleen) to use spare capacity at the plant.