Conoco’s 3D deal opens path for Otway gas
A gas deal between US energy major ConocoPhillips and junior explorer 3D Oil could help ease a forecast east coast supply crunch.
A gas deal between US energy major ConocoPhillips and junior explorer 3D Oil in Victoria’s offshore Otway Basin could help ease a forecast supply crunch set to hit the east coast by 2024.
After selling an 80 per cent stake in the T49P permit in the Otway Basin to Conoco, 3D Oil expects the joint venture will push ahead with a seismic survey followed by a potential exploration well in 2022.
3D, which has owned the 5000sq km permit since 2013, now owns a 20 per cent interest in the shallow water tenement and says the timing is right to push forward with exploration as majors pull back on activity in the Bass Strait amid dwindling production.
“We can see that Exxon‘s production is falling from a cliff and they’re in limbo because of the Bass Strait sale and then Beach have deferred their exploration and development drilling also,” 3D executive chairman Noel Newell told The Australian.
“We saw the gas prospectivity in the Otway and we believe it is the last place you could find large gas reserves on the east coast. We picked it up when gas prices were low and it wasn’t very sexy and worked it up to get a major in there.”
Conoco sold its North Australian assets including Darwin LNG stake to Santos in a $2bn deal while ExxonMobil is on the hunt for buyers as it seeks an exit from the once prolific Bass Strait. Exxon’s partner, resources giant BHP, is also mulling its options including a potential sale in moves which could pave the way for new gas resources to be delivered to the market.
“This block is in shallow water and frontier style but is also on the east coast and close to infrastructure,” Mr Newell said, referencing Beach Energy’s Thylacine and Geographe wells and Cooper Energy’s Annie gas discovery which could provide a path to market for the duo’s gas should they prove successful.
A 3D Oil study conducted with contractor Worley assessing a range of options has been handed to Conoco. Mr Newell, a former BHP executive, said the venture could make a 400 billion cubic feet of gas project economic by connecting to existing infrastructure or should it reach 1 trillion cubic feet it may look to deliver gas onshore.
Conoco originally approached 3D over its WA527P permit in Western Australia’s Bedout sub-basin, located next to Santos’ giant Dorado gas project, where the junior is looking to sell some of its 100 per cent stake.
Instead the US major, which owns a 37.5 per cent stake in Queensland’s APLNG project, opted to open talks on the Otway opportunity given the expected gas shortfall forecast for Australia’s southern states in the next few years.
3D Oil said gas from conventional offshore basins will offer a more competitive source of supplies than planned LNG imports projects mooted in Victoria and NSW.
“The cheapest gas in the Melbourne market is coming from the Gippsland and Otway Basins. It’s hard to imagine how a LNG terminal can be competitive against gas that‘s local in my opinion.”
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