The Galilee Basin in an onshore basin located in central Queensland and covers an area of 270,000 km2. It lies adjacent to two major producing basins in the Bowen and Cooper basins. The Galilee is a prospective basin with about 107 deep exploration wells being drilled since the 1950s. No economic discoveries have so far been made from the limited exploration, but numerous oil and gas shows have been encountered, including in the Lake Galilee Sandstone, indicating an active petroleum system exists.
The basin currently has little infrastructure but will be near the proposed extension of Jemena’s Northern Gas Pipeline from Mt Isa to Roma.
Vintage Energy has signed a farm-in agreement with Comet Ridge Ltd (ASX: COI) to earn a 30% staged interest in the Sandstone reservoir sequence of Galilee Basin permits ATP 743, ATP 744 and ATP 1015 currently held 100% by Comet Ridge.
The transaction relates to the ‘Deeps Area’ within each of the Petroleum blocks, which is defined as including all strata commencing underneath the Permian coals (Betts Creek Beds or Aramac coals) with the main target being the Lake Galilee Sandstone sequence. The high quality technical and commercial work undertaken by Comet Ridge has strongly highlighted the potential of this largely ignored Galilee Basin sandstone conventional gas target. Gas has already been discovered in the Galilee asset and, with future appraisal success, the asset could quickly become a significant contributor to the East coast gas market.
Vintage Energy, through a two-stage farm-in, may earn up to a 30% interest in the Deeps (sandstone targets) within ATPs 743P, 744P and 1015P by committing to spend approximately $8.5 million as part of an up to $15 million work program. Comet Ridge will continue to hold a 100% equity interest in the “Shallows” (the coal targets that generally range from approximately 600 metres down to 1,100 metres).
If Comet Ridge elects not to participate in the second stage of the farm-in process and Vintage decides to do so, the cost of Stage 2 will be met by Vintage Energy at 100%, entitling it to increase its participating interest in the Deeps up to 48.5%.
Full details of the farm-in conditions and stages are provided in the 1st November 2017 media and shareholder release.
The area is lightly explored with little seismic and only 3 wells drilled within the permits. However, the Lake Galilee Sandstone sequence has flowed gas to surface from Lake Galilee-1 (1964) and Carmichael-1 (1995), which were drilled targeting oil. The application of the latest technology and the utilisation of air/nitrogen drilling is expected to unlock significant upside across the permits.
Carmichael-1 is considered to have made a gas discovery and Contingent Resources for the underlying large 75 km2 Albany Structure has been booked by Comet Ridge. It has recently been assessed by independent experts to contain a conventional gas Contingent Resource as shown in Table 1. Via the farm-in process, Vintage will earn its proportional share of these Contingent Resources for the Albany structure, currently held 100% by Comet Ridge.
Table 1: ATP 744 Independent Resource Certification for the Albany Structure
|Conventional Gas Contingent Resource*
The Contingent Resources for the Albany (Carmichael) Structure referred to in Table 1 are taken from an independent report by Dr. Bruce McConachie of SRK Consulting (Australasia) Pty Ltd, originally released to the Market in the Comet Ridge’s announcement of 5 August 2015. They were estimated using the deterministic method with the estimate of Contingent Resources for ATP 744 not having been adjusted for commercial risk. Following the drilling of the Albany-1 well SRK is of the view that the measured gas flow rate endorses their previous estimate of the range of Contingent Resources.
The key to unlocking this valuable resource is obtaining a commercial flow rate. The staged work program is designed to address this issue on the Albany Structure and further define other opportunities around the permits. The program commenced in May 2018 with the drilling of one conventional gas appraisal well (Albany-1) on the Albany structure, close to where the Carmichael-1 well flowed gas in 1995. The well was designed so that the prospective section would be drilled with air/nitrogen rather than conventional drilling mud, to enhance the potential flow rate of the sandstone. Vintage funded the first $3.35 million of this stage (Stage 1a) to earn a 15% interest in the Deeps across the three Galilee Permits.
The well was drilled to a depth of 2,595 mKB but then encountered mechanical problems such that the Joint Venture decided against further penetration of the Lake Galilee Sandstone Reservoir Unit identified in Carmichael-1. However the 13m of the “B” sand that was penetrated then flowed gas continuously for 23 hours before being diverted to the testing equipment where a stabilised flow of 230,000 scf/day was measured over a period of 1.5 hours through a 1¼” orifice plate, with no formation water recovered. The well was then suspended pending further evaluation stages.
The operator, Comet Ridge released an ASX Statement dated 28 June, 2018 in regard to the status of Albany-1. Comments from the Managing Director include:
Stage 2 of the farmin agreement requires each party to spend up to $5 million each (for a $10 million total program) for Vintage to earn a further 15% equity to go to a 30% interest in the Deeps. This stage includes further drilling on the Albany structure, focussing on gathering detailed data on the reservoir rock properties to assist with the design of the optimal field development plan.
Approximately half the Stage 2 funding would also be allocated towards 2D and 3D seismic acquisition to define further drilling targets in the many other sandstone targets across the Galilee permits.
Vintage is looking forward to working with Comet Ridge to help discover, appraise and develop commercial volumes of gas to help ease the stress within the East Coast gas market. A successful outcome will provide commercial opportunities for development of the asset via supply of gas to potential local consumers, such as the proposed Adani coal mine, and impetus for connection of the Galilee Basin into the Eastern Australia gas pipeline network.