Claims of Australia's biggest oil discovery in 30 years

Posted: 18th Aug

US oil and gas player Apache has made what is being heralded by some as Australia's largest oil discovery in the past 30 years, potentially pointing to a new oil province off the north-west coast.

The field found by the Phoenix South-1 well, which had been seen more likely to find gas than oil, could have potentially up to 300 million barrels of oil, Apache reported on Monday.

Only a portion of that volume, however, would be recoverable, analysts said.

While still in the early stages of evaluation, Apache's chief operating officer for its international business, Thomas Voytovich, said the results from the drilling so far "point to a commercial discovery".

"If these results are borne out by further appraisal drilling, Phoenix South may represent a new oil province for Australia," Mr Voytovich said.

One of Apache's junior partners in the venture, Carnarvon Petroleum, went further, with managing director Adrian Cook describing it as "one of the most significant developments in Australian oil and gas in recent times".

Shares in Carnarvon, which owns 20 per cent of the drilling venture, more than doubled on Monday morning.

The find is the first oil discovery in the offshore part of Western Australia's Canning Basin, sandwiched between the Carnarvon Basin, prolific for both oil and gas, and the Browse Basin further round the coast, which has yielded several giant gas discoveries.

StockAnalysis principal Peter Strachan said from the results so far, the discovery could hold up to 60 million barrels of recoverable oil. The well is still being drilled deeper, so may end up being larger, while the size of the offshore Canning Basin, also known as the Bedout Sub-Basin, signals the potential for further similar finds,he noted.

Most oil discoveries in Australia recently have been in the sub-30-million-barrel range, so anything bigger is significant, although "only a drop in the ocean" considering the country has to import about 60 per cent of its oil liquids requirements, Mr Strachan said.

"Of course we're net exporters of gas, through LNG, [and] of coal and uranium, but oil is the most valuable," he said.

Carnarvon's Mr Cook said the find was "the most significant new oil play in the North West Shelf since the Enfield discovery opened up the Exmouth Basin almost 20 years ago''.

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

Carnarvon shares, which closed on Friday at 8.1¢, surged as high as 20.5¢, up 153 per cent.

Japan's JX Nippon and unlisted Finder Exploration also each own 20 per cent of the WA-435-P drilling venture. Apache owns 40 per cent and is the operator.

Apache said the well found oil in at least four different sections of the hole, and testing has shown the reservoir to be productive.

The oil is "light", which should make it easier to produce, and also attracts higher sales prices.

Mr Voytovich, who is also an executive vice-president at Houston-based Apache, described the result as "exciting", while cautioning that the results were still in the early stage of evaluation.

Mr Strachan estimated the oilfield could cost about $1 billion to develop using a floating production vessel producing 20,000-25,000 barrels per day. Initial investment costs could be about $500 million, he said.

Significantly, the discovery prompted Apache and JX Nippon to commit to drilling a second well in an adjacent permit, the Roc prospect in WA-437-P, which will be drilled in 2015, Carnarvon said.

Apache has also exercised an option to buy a 40 per cent stake in two other adjacent permits, and will take over as operator of those ventures, it said.

August 18, 2014 - Angela Macdonald-Smith -