Flow tests from the deepest oil well ever drilled in Australia are expected within days, but it has already refocused attention on the oil and gas industry in the Perth basin.
The West Erregulla-2 well 230km north of Perth last month found what Strike Energy managing director Stuart Nicholls has called a “staggering” gas discovery about 4.7km deep in the Kingia sandstone.
The drill has now hit its other primary target, the High Cliff sandstone, and on Monday had reached a depth of 5,017 metres, with just another roughly 185m left to drill.
“We believe we have a real world-class resource, and we believe that will be confirmed very shortly,” said Dennis Donald, the managing director of Warrego Energy, Strike’s partner in the joint venture.
“It’s pretty damn exciting.”
The well 50km southeast of Dongara is being drilled by Easternwell’s Rig 106, one of the most powerful onshore rigs in Australia.
The well is 16km from the Waitsia gas field discovered in 2014, Australia’s largest onshore conventional gas discovery in 40 years.
That find led to a $602 million takeover last year of operator AWE Limited by Japanese conglomerate Mitsui, which is commercialising the gas field.
Beach Energy also ended up buying AWE’s partner in the joint venture, Lattice Energy, from Origin Energy for $1.6 billion.
EnergyQuest chief executive Graeme Bethune said that discovery revitalised interest in the Perth basin, which spans 172,000 sq km across WA.
While discoveries had been made there in the 1960s and 1970s, interestin the 1980s shifted north to the Carnarvon Basin, where the mammoth $25 billion offshore North West Shelf Venture is located.
The unexpected Waitsia find “really opened people’s eyes in the basin,” said Ian Smith, managing director of Norwest Energy, which holds a stake in an exploration permit north of West Erregulla.
But until now, the question had been whether Waitsia was an anomaly or there was more gas locked deep under the earth in the Perth basin, at depths previously thought unfathomable, Mr Smith said.
Norwest’s partner Mineral Resources had already planned to drill next year but the Strike/Warrego find “has derisked our prospects to some extent,” Mr Smith said.
“We’re very excited.”
As are investors, who more doubled Norwest’s share price in August.
“There have been a bit of feeding frenzy in the market,” Mr Smith said.
Shares in Key Petroleum, which also holds permits in the area, had a 181 per cent share price increase in August.
The discovery “validates our strategy, it certainly validates our geological model,” said Key Petroleum managing director Kane Marshall.
Still there are challenges.
Mr Bethune called West Erregulla a “good discovery” but said the price of natural gas on Australia’s west coast is so low that the companies may have trouble commercialising the resource.
“I’m sure they will, it’ll just be a matter of time,” he said.