Oil Prices

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Apache announces major new WA oil find
STEPHEN BELL DOW JONES AUGUST 18, 2014 4:51PM

IN what would be one of Australia’s largest oil discoveries in decades, US energy company Apache said an exploration well offshore Western Australia had found as much as 300 million barrels of crude.

The drilling result from the Phoenix South-1 well in the offshore Canning Basin could reopen a frontier for oil exploration that some international energy companies abandoned decades earlier after wells turned up dry.

“The oil and reservoir quality we have seen point to a commercial discovery,” said Thomas Voytovich, a senior executive at Apache’s international arm. “If these results are borne out by further appraisal drilling, Phoenix South may represent a new oil province for Australia.”

Australia is in need of new sources of oil to replace fast diminishing reserves from existing fields.

According to BP, Australia’s oil production last year fell by 17 per cent to 416,000 barrels a day — its lowest level since 1972 — as conventional fields became depleted.

That is in contrast to natural gas where several big discoveries by companies including Chevron PLC and Royal Dutch Shell have paved the way for investments totalling tens of billions of dollars in export infrastructure to feed Asian demand for cleaner-burning fuels.

Early estimates that Phoenix South-1, drilled 180 kilometres north of Port Hedland in 133 meters of water, found up to 300 million barrels of oil in place compare favourably to recent discoveries in Australia.

For example, Woodside Petroleum’s 1999 Enfield discovery, which led to a wave of new drilling in the nearby Exmouth Basin, started production in 2006 with reserves of 127 million barrels of oil.

Further to the North West, Chevron’s Barrow Island field has produced an estimated 322 million barrels of oil since it came online in the 1960s, according to Western Australian government data.

Simon Andrew, an energy analyst at Perth-based broker Hartleys, said the full significance of the Phoenix South discovery would not be known for some time.

“It will take two to three months to work out the actual recoverable volumes from the discovery,” he told The Wall Street Journal.

Apache said testing had confirmed at least four distinct oil “columns” in the seabed rocks ranging in thickness between 26 meters to 46 meters, with six light oil samples recovered from three intervals so far.

Apache is the operator of the WA-435-P block where the discovery was made, and owns a 40 per cent stake in the license and the adjacent WA-437-P permit.

Other investors include Carnarvon Petroleum, a unit of Japan’s JX Holdings, and closely held Finder Exploration.

News of the discovery led to Carnarvon’s stock tripling in value today.

“This is the most significant new oil play in the North West Shelf since the Enfield discovery opened up the Exmouth Basin almost 20 years ago,” said Adrian Cook, managing director of Carnarvon, which has a 20 per cent stake in the project.

“The implications on the rest of our acreage are still being assessed, but the potential is extraordinary,” he said.

Apache said the area around Phoenix South includes several large structures, including the Roc prospect on WA-437-P, that could also contain lots of oil.

The company is planning to drill more wells next year.