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Australia’s Dorado: A black gold bonanza

After three decades without sizable discoveries, Western Australia is now the country’s most exciting exploration province

Australia's largest oil find in three decades reportedly came about by accident. Perth-based mid-cap explorer Carnarvon Petroleum was looking to prove the size of its Phoenix South gas resource when it stumbled upon a vast oil find in shallow water close to shore.

Located in the Bedout Sub-basin, some 100km (62 miles) off the coast just north of Karratha, the Dorado field is estimated to hold an initial 171m barrels of oil and 16m barrels of condensate, a 2C liquids total of 186m barrels. This is well above the average discovery size of 60m barrels in the North West Shelf (NWS).

Dorado is also estimated to hold 552bn cubic feet (2C) of gas, giving a total volume of oil equivalent at 283m barrels (2C). It's a continuation of Carnarvon's exploration in the Roebuck Basin that previously located gas and condensate at nearby Roc and Phoenix South.

Announced to the market in August 2018, the Dorado find has elicited much attention for operator Carnarvon Petroleum and its partner Quadrant Energy, which will be acquired by Santos in a move announced following the drilling success.

"Dorado is described as Australia's largest oil find in 30 years. But this doesn't do it justice. Assuming it delivers as expected—based on the 2C liquids total of 186m barrels-Dorado will be the most valuable Australian oil find ever," Gero Farrugio, Managing Director of Rystad Energy told Petroleum Economist.

Very light oil

Rystad believes Dorado is the most significant single discovery since Hermes was discovered on the NWS in the mid-1990s. This is because it offers very light crude oil with an API gravity of 49.6°—meaning it will be easier to refine than heavier crudes—and is located in just 87 metres of water depth, reducing development costs. The strata in which Dorado is located is also high in porosity and permeability with little associated water.

Dorado's value is estimated at around $1.36bn (NPV10-net present value with a 10% discount), assuming 2P recoverable reserves in the order of 266m boe and Rystad Energy's base-case oil price assumption ($75 a barrel in 2018). This doesn't include any value that Quadrant and Carnarvon Petroleum could realise in their other assets in the Roebuck Basin of Phoenix South and Roc.

Production at Dorado is likely to begin in 2025 with a floating production and storage and offloading unit expected to be used to produce the oil and condensate, and tie-back to transport the gas to processing facilities in Karratha.

For now, Carnarvon is planning a two-well appraisal programme in 2019 and a final investment decision in 2020, while simultaneously assessing the significance of another find—a very large structure near Dorado known as Apus on which the upside could be "staggering".

"It's a champagne problem to have two oilfield developments to be looking at, both of which are fairly stunning in their own right," says Carnarvon Petroleum's CEO Adrian Cook.

The discoveries are generating much excitement among explorers and investors. "All eyes are on what's next in the Roebuck Basin and other WA explorers capitalising on a ripple effect of optimism on future prospects around Dorado, in the Roebuck Basin, which is being described as a 'constellation of stars'," says Farrugio.

A further 10 prospects in the surrounding area have been identified, with the self-proclaimed title of 'Australia's most exciting exploration province'. Not bad for a region that has paused on sizeable finds for 30 years.

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