Basin review, Cooper Basin, Eromanga Basin, Projects, Surat Basin

Senex Energy on Australia’s unconventional gas revolution

Senex is an established player in the Australian oil and gas industry, boasting a sizeable acreage position in Australia’s most important onshore petroleum and natural gas deposit in Australia – the Cooper Basin. Unconventional gas offerings constitute a significant part of the energy company’s portfolio of growth projects, with its unconventional gas exploration program underway with partner Origin Energy in the aforementioned basin and its coal seam gas (CSG) acreage strategically located in the Surat Basin.

In August this year, Senex Energy reframed its long-term growth strategy and announced a few new projects that would deliver production and reserves growth across its portfolio as well as leverage its financial strength and operating capability.

In Mr Davies’ view, the strategy builds on previously stated growth ambitions and establishes a clear vision for the business – which includes the goal of becoming an S&P/ASX 100 oil and gas exploration and production company.

According to Mr Davies, gas is an integral part of this new direction.

“Gas is a key plank of our recently announced four-year growth strategy. Oil has been our strength in recent years and will continue to play an important and fundamental role in our business but building our gas business is the next game changer for us – it offers the potential to take Senex to the next level.”?

A key focus: the Western Surat Gas Project

In September this year, Senex Energy announced an asset swap with QGC, China National Offshore Oil Corporation (CNOOC) and Tokyo Gas – the QGC JV. Under the agreement, Senex will exchange its minority interests in the QGC-operated Surat Basin gas permits in PL 171 and ATP 574P, Queensland for a 100 per cent interest in, and operatorship of, three QGC JV Western Surat Basin permits.

On completion of the transaction, Senex is expected to hold net 2P gas reserves of 83 million barrels of oil equivalent (MMboe).

“Combining the new assets with Senex’s existing Western Surat Basin acreage gives Senex the scale required to build a material Surat Basin gas business on its own terms, and ultimately moves these assets up the maturity curve to deliver material reserves and production to the company,”? Mr Davies said in Senex’s September 2014 Quarterly Report.

Mr Davies says the asset swap was a win-win for both Senex and the QGC JV.

“It allowed us to consolidate our presence in the Surat Basin and accelerate our plans to commercialise our CSG interests. Practically, it also gave us control of a material gas project close to major gas production facilities near Roma.”?

Senex is in the midst of building a dedicated team for the Western Surat Gas Project, and has already commenced planning activities for community and landowner engagement, environmental baseline studies, subsurface modelling and initial pilot programs.

New horizons: the Hornet gas field

Additionally, construction on the water, condensate and gas separation equipment on the Hornet gas field in the southern Cooper-Eromanga Basin and its connection via pipeline to the Santos-operated South Australian Cooper Basin Joint Venture (SACB JV) network at the Allambi gas field is now substantially complete, with the facilities soon to be ready for commissioning.

The two wells, Hornet-1 and Kingston Rule-1, are expected to be completed and brought into production for extended flow testing during the December quarter. All gas produced will be sold into the SACB JV over two years.

Mr Davies says Senex’s first gas sales into the SACB JV is a significant development.

“Our first gas sales to the SACB JV will be a major milestone for Senex. It will be an important step in our evolution into a major Australian oil and gas producer and the forerunner to a larger and sustainable gas business both in the Cooper and the Surat Basins.”?

Senex is set to build on this breakthrough with further gas sales in the future.

“We are working on several projects simultaneously across our portfolio of exploration permits in Queensland and South Australia that encompass both conventional and unconventional gas plays,”? Mr Davies says.

The Cooper Basin is currently Senex’s main operating base, and Mr Davies expects it to remain critically important given the size of the resource and the extent of existing infrastructure.

“Our Cooper Basin oil business has provided a high-margin, low-risk environment for us to build a strong foundation for future growth. We expect that it will continue to contribute value to the business in the coming years given our extensive acreage position across proven oil and gas precincts,”? Mr Davies says.

An unconventional gas JV with Origin Energy

Detailed planning work is also underway following the satisfaction of all conditions precedent on Senex’s $185 million farm-in transactions with Origin Energy – the downstream operator of the Australian Pacific LNG Project – in June 2014.

The Senex-operated JV’s broad work program aims to evaluate multiple play types in the Patchawarra and Allunga Troughs – including tight gas plays, basin-centred potential, shales and deep coals.

The characteristics of the targeted areas differ to those in the neighbouring Nappamerri Trough, with wells in the Allunga Trough being shallower and lower temperature. Wells in the Patchawarra Trough are expected to be similar depth to the Nappamerri Trough wells but have much lower temperatures and lower pressures, and are therefore less expensive and less technically complex.

In addition, the areas are expected to exhibit lower carbon dioxide levels, and have gas, liquids and condensate potential.

Mr Davies says, “Unconventional gas is a long game that offers huge potential to deliver a major new gas resource for Australia. Our partnership with Origin presents us with a terrific opportunity to accelerate the exploration and appraisal of our unconventional gas assets in the Cooper Basin.”?

Eyes on the future

Mr Davies says Senex’s current focus is on gas flow testing at the Hornet gas field as well as planning for production testing at other existing gas wells in the Cooper Basin.

At the same time, he says Senex is progressing planning for its unconventional gas exploration in the Cooper Basin with Origin, and is appraising CSG prospects in Queensland through its Western Surat Gas Project.

As for what lies on the horizon for the gas industry, Mr Davies remains optimistic – even as the fossil fuel divestment issue continues to build momentum.

“Senex supports a sustainable energy future and natural gas – whether conventional or unconventional – clearly has a major role to play as a key transitional fuel in the move towards a cleaner energy mix.

“Gas presents a huge opportunity to enhance Australia’s energy supply capacity – both for domestic and international consumption. The CSG to LNG industry in Queensland has already demonstrated that unconventional gas has an important role to play.”?

Mr Davies says the unconventional gas sector in Australia is in its infancy by global standards, and as a result, faces challenges on the commercial, reputational and technological fronts.

“Globally however, the industry has a history spanning more than 20 years – giving us the opportunity to access international experience and learn those lessons from the outset. We certainly intend to focus on planning extensively before we have boots on the ground in any of our unconventional gas project areas.

“Gas is a long game compared with oil but we have the benefit of operating in a hydrocarbon province where a great deal of infrastructure is already in place. When you add that to the macro environment, where gas demand growth and increasing gas prices are expected in the near term, we believe we are well-placed to benefit.”?

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