Strike Delivers Maiden Perth Basin Gas Reserve

Source: www.gulfoilandgas.com 10/11/2021, Location: Not categorized

• Internationally recognised subsurface consultancy Netherland, Sewell & Associates, Inc. (NSAI) has certified 300 PJ 2P and up to 372 PJ 3P gross gas Reserves at the West Erregulla gas field in the Kingia Sandstone alone.
• NSAI’s Reserves certification supports progression of the West Erregulla Gas Project into its Phase 1 of development.
• Considerable upside has been identified by NSAI in the West Erregulla gas field with a further 128 PJ of gross 2C Resources and 198 PJ of gross 2U Resources.
• NSAI’s mapping of West Erregulla shows a continuous gas resource to the southern boundary of the permit supporting Strike’s high degree of confidence in the potential of the 100% owned South Erregulla prospect.

Strike Energy Limited is pleased to announce that it has delivered its maiden Perth Basin Gas Reserve only 24 months after its first exploration operations in the Basin.

“Natural gas from the Erregulla region in the Perth Basin is one the most competitive energy sources in the country, competing on cost, carbon and reliability.

“Delivering our maiden Perth Basin reserve is an important step on the journey towards delivering Strike’s Mid-West vision of becoming a Net Zero 2030 integrated energy, fertiliser and renewable power producer, predicted to be the first of its kind for Australia.

“These initial reserves are the beginning of a value staircase with a clear plan to increase the recoverable resources in the Erregulla complex and come at a time when gas availability is shortening and its value in the energy system is rising.

“These NSAI certified resources are bounded by significant upside and potential in Strike’s 100% owned acreage, where gas resources have been booked to the very southern edge of the permit boundary, where Strike’s acreage continues.”

West Erregulla Gas Project
Internationally recognised subsurface consultancy, Netherland, Sewell & Associates, Inc. (NSAI) have estimated gross 2P gas reserves of 300 PJ (150 PJ net to Strike)1 which supports the progression of the West Erregulla Phase 1 gas project and recognises the resource conversion success of the drilling, appraisal, and development programme thus far.

Strike will now proceed to take the development forward and enter into mandates with various banks in order to commence due diligence prior to finalising the terms of a Project Financing facility for the Phase 1 development, where EP469 gas (subject to certain conditions being met) has been sold to the project’s foundation customers, Wesfarmers and Alcoa.

Construction of the upstream and midstream processing facilities is expected to commence in 2H 2022 following the endorsement of upstream and midstream final investment decisions and receipt of necessary approvals under Part IV of the Environmental Protection Act 1986 (WA) with first gas expected in 2H 2023.

Australian Gas Infrastructure Group will build own and operate the 87 TJ/d gas plant to process the EP469 Phase 1 gas. The plant will be constructed within the EP469 permit area and will directly tie into the Dampier to Bunbury Natural Gas Pipeline (DBNGP).

West Erregulla Resources & Reserves
NSAI has recognised substantial growth potential in the West Erregulla gas field with a further 128 PJ of gross 2C Contingent Resources (64 PJ net to Strike) and 198 PJ of gross 2U Prospective Resources (99 PJ net to Strike) in the Kingia, High Cliff and Wagina/Dongara Sandstones.

The NSAI Reserves and Resources report is based on the drilling, coring, log, seismic and production testing data from the various strata and exploration and appraisal wells drilled throughout the field.

NSAI have estimated reserves and resources against the following field contours for the Kingia Sandstone:
• 1P Reserves down to 4,630m subsea true vertical depth (ssTVD) excluding the most Northern and Southern areas).
• 2P Reserves down to 4,650m ssTVD on the Western side of the field and 4,630m ss TVD on the Eastern side of the field.
• 3P Reserves down to 4,650m ssTVD.
• All Contingent Resources (1C/2C/3C) down to 4,655m ssTVD. (excluding the most Northern and Southern areas).
• All Prospective Resources (1U/2U/3U) down to 4,670m ssTVD.

Strike also observes the potential for deeper gas down to 4,720m ssTVD on at least the Western flank of the field, which Strike estimates could potentially add 155 PJ of P50 upside recoverable gas resources that NSAI risked out in the deeper Kingia horizon. A down dip well would need to be drilled to confirm this additional upside resource.

The West Erregulla appraisal program has delivered a larger sample set of results for the field, but a wider distribution of various input factors than was considered in September 2019 in the initial resource estimate by Strike after the first well penetration of WE2. This distribution has generated a lower total resource base where some of the original Contingent Resources have either been risked out of the distribution or reclassified as Prospective Resource. In most cases NSAI and Strike have landed on similar inputs for the calculation of the resource including gas saturation, expansion factors, rock properties and calorific values. However, there have been some areas where Strike’s original assumptions were disproven by the appraisal drilling programme. For example, the WE2 production test was observed as dry which indicated a naturally depleted drive of the West Erregulla reservoir, whereas post the appraisal program and observation of a water body in the WE4 well, test data now additional drive mechanisms, therefore, a corresponding reduced overall recovery factor. As a result, NSAI have assessed the P50 final recoverable volumes at 138 PJ less than Strike had originally estimated. In addition, the High Cliff was observed to have poorer reservoir development in wells drilled subsequent to WE2 which has reduced the estimate of recoverable High Cliff resources by 163 PJ.

There remain a number of areas where Strike’s interpretation of some of the data used in the reserve and resource estimate has differed from NSAI’s, which is based on their risking profile and as a result NSAI have risked some volumes out of their distribution. This provides the opportunity for additional resource upside on the provision of further supporting information and data. These areas include:
• Time depth conversion: Strike observes the opportunity for up to 130 PJ of P50 recoverable resource from the inclusion of gross rock volume that was not included in this NSAI estimate due to insufficient quality and resolution of seismic data. Additional processing and the planned Natta 3D Seismic program would be required to review the structural mapping in order to reduce the uncertainty of the field boundaries.

• Perched Water: The Eastern flank of the field was given a shallower contact of 4,630m ssTVD by NSAI reflecting the presence of water in the WE4 well test. The areal extent of this polygon is currently substantial and resulted in a reduction by NSAI in the total P50 recoverable resource of 180 PJ. The large size of this polygon is due to the lack of additional well control on the eastern side of the field, where identification of the water boundary from additional drilling results in the East could prove smaller and, therefore, incremental gas prone reservoir coming back into the total gross reservoir volume.

• Recovery Factor: NSAI has used a P50 recovery factor of 70% due to the depth of the field and the lack of extended production data from any equivalent deep penetration in the Basin. P50 recovery factors of 75% or more have commonly been used for the Permian gas discoveries of the Perth Basin, which may be possible at West Erregulla once additional production data is available. An increase in recovery to 75% would see a P50 incremental recovery of 30 PJ. \\ West Erregulla Drilling & Testing
NSAI has booked Reserves over both the WE5 and WE3 areas, thereby reducing the urgency to retest/recomplete these wells at a time when it is difficult to secure the necessary expertise and equipment due to movement restrictions into Western Australia. As such Strike plans to return to WE3 in 1H/22 in order to deepen the well into the Kingia High Cliff and will look to campaign the retesting of WE5 along with WE3 and possibly other wells in the area, which could include South Erregulla 1 and or Lockyer Deep 1. This will drive cost savings and facilitate adequate time to prepare the West Erregulla well inventory for future production operations.

The joint venture has also proposed a new well, West Erregulla 6 (WE6) to be drilled in FY23. This well will provide additional production capacity and redundancy for the Phase 1 production operations and may provide the opportunity to test some of the upside opportunities within the field.

South Erregulla
NSAI has identified West Erregulla’s Contingent Resources to the far south down to the permit boundary of EP469. EP469 borders EP503, Strike’s 100% owned and operated permit that contains the South Erregulla prospect.

Strike’s interpretation that West Erregulla is connected to South Erregulla3 is further supported by NSAI’s work. NSAI’s booking of resource to this arbitrary point bodes well for the probability of success in the South Erregulla-1 well and, as a result, Strike has sought approval from the regulator to add a second South Erregulla well into its Environmental Permit to facilitate timely appraisal and faster reserves conversion on success.

Strike has previously published a Prospective Resource for its South Erregulla prospect3 which it intends to drill in Q4 of this calendar year subject to procurement and rig timing. As NSAI and Strike have agreed on similar rock properties and gas saturations, Strike continues to endorse the original in place volume as previously released to the market. The application of future recovery factors to any discovery will be reviewed in parallel to the NSAI recovery factors applied to this resource assessment, however, Strike does not intend to revise the South Erregulla in place resource estimate until it has drilled the South Erregulla-1 well and has the requisite well data to better inform any resource estimate adjustment.


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