AUSTRALIA: HUGE GAS DISCOVERY
Australian energy company AWE Ltd. said Thursday it may have made the largest onshore natural-gas discovery in Western Australia for 50 years, in partnership with Origin Energy Ltd.
The Waitsia field could contain more than one trillion cubic feet of natural gas, AWE said, following an initial analysis of the recently drilled Senecio-3 well. The assessment helped to send shares in Melbourne-based AWE up 14%.
Australia has long been a hot spot for oil and gas exploration, and international companies including Chevron Corp. and Royal Dutch Shell PLC are investing billions to build export facilities following success with the drillbit in previous years.
However, industry groups say interest has been flagging recently, especially offshore where drilling costs can be high. In May, the Australian Petroleum Production & Exploration Association said the number of offshore wells drilled in Australia has fallen by more than two-thirds since 2003, while the total cost has increased fivefold.
AWE and Origin's Waitsia discovery, about 350 kilometers (217 miles) north of the state capital Perth, could help reverse this trend. It also comes exactly a month after U.S. energy company Apache Corp. APA -0.33% announced what would be one of Australia's largest oil discoveries in decades, with its Phoenix South exploration well offshore Western Australia finding as much as 300 million barrels of crude.
Most of Western Australia's oil and gas output is shipped to Asia where it is processed to create fuels for use by everything from power plants to cars. But there is also robust demand for piped natural gas within Western Australia to power mining and mineral processing projects, and AWE indicated it favors supplying gas from Waitsia to this market.
AWE believes the Waitsia field, located close to the shallower and smaller Senecio field, contains a gross contingent gas resource of between 65 billion cubic feet and 1.17 trillion cubic feet.
The wide range is because of the limited data available. AWE said further testing of the find is expected later this year, and says its best estimate is that the field contains 290 billion cubic feet of natural gas.
"AWE believes the Senecio/Waitsia discovery could represent the largest onshore conventional gas discovery in Western Australia since the Dongara gas field was discovered in the 1960s," AWE Managing Director Bruce Clement said.
The gas in Waitsia could be produced relatively quickly using existing infrastructure just 7 kilometers from the well, he said.
If additional testing is successful, the new fields could deliver "significant additional gas into the Western Australia domestic market," Mr. Clement said.
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