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Northern Territory shales worth waiting for – Imperial

Up to 24 trillion cubic feet (cf) of recoverable gas resources

Imperial Oil & Gas is excited by the shale-gas potential of Australia’s Northern Territory and hopes to start exploration once permission is granted by aboriginal landowners.

Imperial, an offshoot of ASX-listed Empire Energy, hopes to kick-start initial exploration studies over around 59,000 square km of shale-gas acreage in the Northern Territory, with potentially recoverable resources of 24 trillion cubic feet (cf) of gas.

Imperial chief executive John Warburton told Petroleum Economist that he is encouraged by the GRNT-79-9 well, drilled in 1979 by Amoco in the McArthur basin, which was seeking minerals but hit gas. The well blew out and discharged a total of 1 billion cf, or about 6 million cf/d for six months, until it was naturally extinguished by seasonal rains.

But before Imperial can start work on its permits in these culturally and environmentally sensitive areas, it must first secure permission from aboriginal landowners. Warburton said his firm is taking a value-based approach to people and the environment ahead of resources. He hopes to secure access agreements by the end of 2012 or early 2013, but stresses that if the aboriginals owners do not want exploration on their land, Imperial is happy to wait.

If the indigenous owners reject the agreements, Imperial must wait another five years before reapplying for access, unless the owners reinstate talks before that.

Manage their destiny

Warburton said that, like oil company Petromin in Papua New Guinea, the aboriginal people in Australia have the capability to be able to manage their destiny. “Sometime in the future, there will be an aboriginal-led oil and gas company responsible for managing exploration, investment, royalties and wealth distribution across their part of Australia.”

Imperial wants to explore Palaeo-Proterozoic organic rich black shales of the Barney Creek formation, in the south McArthur basin, and equivalent that are proved to be gas-prone. If all goes well and approvals are successfully negotiated, it plans to start initial exploration studies and coring in 2013.

The work programme will be essentially the same in each of its seven permits. The first two years of the initial five-year exploration term will be taken up with geological fieldwork, sampling and acquiring core samples to test the quality of any potential gas shales. Year three will focus on 2-D seismic acquisition to define targets for drilling vertical test wells in the following year. If successful, then the year-five work programme will include drilling and evaluation of a deviated or horizontal well with fracturing and production testing.

Within five years, shale exploration technology will have developed to mitigate any environmental footprint, Warburton hopes.

Speaking about the debate raging in Australia over the environmental dangers of coal-bed methane (CBM) development, he expects many of the flames will be extinguished by the trailblazing outfits that are already three to four years ahead of Imperial in terms of unconventional development.

To date, Australia has no commercial shale-gas production, but initial estimates suggest the country has great potential. These sentiments are shared by a string of international players. Since June 2010, several foreign outfits, including Mitsubishi, China National Offshore Oil Corporation, Hess, ConocoPhillips and BG, have all struck shale deals with junior Australian companies. Australian players Beach Energy and Santos are both eyeing initial commercial shale gas production by 2015.

According to the US Energy Information Administration, Australia has 396 trillion cf of risked technically recoverable shale-gas resources. This is greater than the country’s estimated CBM reserves that will underpin three CBM-liquefied natural gas projects being built in the state of Queensland and expected to deliver export capacity of over 3 billion cf/d.

And surging gas prices could help support further development of Australia’s unconventional-gas sector, bringing more reserves into play. The continent also offers opportunities for shale-oil. Linc Energy recently announced a potentially significant untapped oil-shale play in South Australia’s Arckaringa basin.

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