EP413, onshore northern Perth Basin

EP413 is underexplored and is prospective for oil, conventional gas and shale gas.

Norwest  has increased it equity in this permit to 56.606% after buying the equity in the block held by Origin Energy and Victoria Petroleum. Following the completion of the Bharat PetroResources Limited (BPRL) farm-out, Norwest and BPL will each hold 28.303%. The remaining 43.394% is held by AWE.

The Company believes strongly in EP413's potential and this acreage is the focal point of Norwest's shale gas exploration strategy. The permit's shale gas potential played a large role in attracting BPL, a major Indian state-owned explorer, as a farm-in partner.

Norwest and AWE have agreed to work together towards drilling a well on EP413 in early 2011 and BPRL is eager to participate in this project. The current target location is at Arrowsmith, a prospect that was drilled in the '60s and flowed gas. It is proposed to drill to about 3200 metres and complete and produce from the Caryginia formation. As part of evaluating the shale gas potential core data will be acquired at the three shale intervals: the Kockatea Shale, the Caryginia Shale and the Irwin Coal Measures.

Two major pipelines (the Dampier-Bunbury pipeline and the Parmelia pipeline) run near this permit, which lies immediately north of the energy-hungry markets of Perth and South West WA and immediately south of the emerging Mid West mining province.

Given WA's high gas prices, the northern Perth Basin's infrastructure and the proximity to major markets, Norwest believes this region is a good candidate to become Australia's first shale gas production province.

But EP413 also offers more than just shale gas potential.  There is considerable potential for conventional oil and gas in this underexplored block.  

Several leads and prospects require further evaluation as potential conventional drill targets.  These include: Robb, Aiyeenu, Stockyard, Weelawadji and Uniwa.  All of these leads and prospects will be evaluated for both conventional and unconventional hydrocarbons potential in the process of conducting the shale gas program.

Shale gas

The characteristics of many of the older shales in the Perth Basin are very similar to some of the more prolific shale gas producers in the USA such as the Eagleford shales in Texas

Many of the Perth Basin's older shales have very similar characteristics to those in prolific shale gas regions in the US, such as the Eagleford shales in Texas. Norwest has interests in more than 1 million acres in northern Perth Basin permits that contain thick and potentially gas-rich shales. The company believes that the region's shales could become a significant source of gas for the WA domestic market. Just as coal seam gas production has grown enormously in Queensland over the last few years, shale gas has become very important in the US, and shales north of Perth have similarities to gas-producing shales in the US.

Commercial exploitation of shale gas has not yet been attempted in Australia, but the US has showed the way and there are good reasons to believe the success of shale gas in the US can be replicated in Australia.

The rewards for a small player like Norwest could be huge. The company takes shale gas very seriously and so does our farm-in partner, Bharat PetroResources Limited (BPRL), a major Indian refining and exploration corporation.

The EP413-TP/15 farm-out bundles together oil, conventional gas and shale gas exploration and rights in both permits. Norwest's exploration program will be designed to assess the two blocks' potential for all of these commodities.

Western Australian shale potential

Norwest is not the first company to have developed an interest in Perth Basin shale gas.

AWE is investigating shale plays in the Perth Basin and says this region's thick shales have significant potential. Norwest, which is a partner in some AWE permits, is paying close attention to AWE's work.

Other parts of Australia - most notably the Cooper Basin - also have extensive gassy shales, but AWE, Norwest and some analysts believe WA is likely to be the first part of Australia to commercialise shale gas.

This is because WA has Australia's highest domestic gas prices - relatively high prices even by global standards and more than twice as high as eastern states gas prices.

In addition, the underused Parmelia pipeline (which runs from Dongara to Perth) is carrying only about a third of its full capacity (carrying about 30TJ/day, but has capability to transport 90TJ/day). So any Perth Basin gas found can be quickly commercialised.

This would also increase security of gas supply for the state by reducing reliance on North West Shelf and Varanus Island.

Shale gas exploration in WA

Analysis of drill cuttings from several Perth Basin wells gave AWE the confidence to undertake a full shale gas coring program.

The company re-entered the existing Woodada Deep-1 well in March to recover core samples. These have been analysed to help determine the gas production potential of shales in AWE's L5 production permit, which lies immediately south of the EP413 permit, which has the same shale sequences as L5 and is jointly held by Norwest and AWE.

AWE is now considering fracture-stimulating the middle 60 metre interval in the Carigynia shale at Woodada Deep to encourage gas flows.

Norwest and AWE have agreed to work together towards drilling a well on EP413 early 2011 and BPRL is eager to participate in this project. The current target location is at Arrowsmith, a prospect that was drilled in the '60s and flowed gas. It is proposed to drill to about 3200 metres and complete and produce from the Caryginia formation. As part of evaluating the shale gas potential, core data will be acquired at the three shale intervals: the Kockatea Shale, the Caryginia Shale and the Irwin Coal Measures.

Shale gas in the US
 
Much as Queensland's coal seam gas has gone from being a joke to a highly valued commodity, the commercial potential of shale gas has been seriously re-evaluated. Once considered commercially unviable, shale gas is now a major source of US gas production.
 
Shale gas now accounts for one-sixth of US gas production and it share of production is growing rapidly. Indeed, improvements in shale gas technology have turned the US from a potential importer of LNG to a country with excess gas production.

Explorers have long known that the shales that can hold large amounts of gas. But it has been difficult to extract the resource as shale has poor permeability, which inhibits the flow of gas.

However, innovations developed in the US have now made it commercially feasible to produce natural gas from shale rock. Horizontal drilling and fracture stimulation, or 'fraccing', increase the surface area of the well in contact with gas-bearing rock. This significantly boosts local permeability and increases the amount of gas that flows to surface.

As these techniques have become more effective and less expensive, their cost has fallen and there have been big surges in US shale gas production.

• TP/15
• Jingemia: L14
• EP413
• EP368/EP426
• Puffin: AC/P22 & AC/L6

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