Otway Basin

The Otway Basin is a rift basin located in onshore and offshore South Australia, Victoria and Tasmania. It extends for 500 kilometres and covers the area from the west of Melbourne to Cape Jaffa in South Australia, to the north of King Island in the south. Major producing projects in the basin are situated offshore Victoria/Tasmania and include Beach Energy’s Otway Gas Project (Thylacine and Geographe fields) and the Halladale, Blackwatch and Speculant fields, as well as Cooper Energy's Casino, Henry and Netherby fields. Gas has also been produced from the Katnook, Ladbroke Grove and Haselgrove fields in the onshore Penola Trough in South Australia. The basin is relatively under-explored by international standards, with potential for further gas discoveries in the Penola Trough and the offshore areas of the basin.

Currently, the basin is serviced by three main processing facilities near Port Campbell in Victoria (Otway, Minerva and Iona gas plants). In South Australia, the Katnook gas processing plant is located near Penola and is connected to various industries in the region and to Mt Gambier. All facilities are connected to the SEA Gas pipeline which sends gas to Melbourne and Adelaide.

Over 70 Bcf of gas and 0.4 MMbbl of condensate has been produced from the Pretty Hill Sandstone reservoirs in the Penola Trough, which has been supplied to local industry and the Ladbroke Grove power station (commissioned in 2000).

PRL 249 (exPEL 155), Penola Trough, Otway Basin

  • Vintage Energy Ltd - 50%
  • Otway Energy Pty Ltd - 50% (Operator)

Recent events

Easternwell Rig 106 spudded the Nangwarry-1 well on 1 December 2019, with total depth (“TD”) reached at 4,300 metres measured depth (“MD”) in the Pretty Hill Formation on 31 December 2019.

Following very encouraging wireline logging results and sampling, the Joint Venture conducted an extended production test of Nangwarry-1 in the top Pretty Hill Sandstone. This was undertaken in March/April 2021. Flow testing took place with the well producing strongly at 10.5-10.8 million standard cubic feet per day (“MMscfd”) through a 48/64” choke at a flowing wellhead pressure of 1,415 psi over a 36 hour period. This flow was measured through a 3” orifice plate and choked back in order to analyse the well over this extended flow period with stable conditions.  The well is very productive and, over shorter periods, is capable of flow rates in excess of those measured during the extended flow test.

The production test is a key milestone on the path to first production of food grade CO2. The production test will confirm volumes of saleable CO2 and allow the Joint Venture to consider appropriate debt funding options for the infrastructure required to produce food grade CO2. The co-produced methane (approximately 10%) will be used to power any future production plant.

A stable source of CO2 is currently in high demand. After producing CO2 for 50 years the Caroline-1 well ceased production in 2017. Caroline-1 is located within 100 kilometres of Nangwarry-1 and remains South Australia’s most profitable well to date (refer to DMITRE, Otway Basin South Australian acreage release dated August 2012).

The main industrial uses for food grade CO2 include:

  • Carbonation of soft drinks, fruit juices and beer
  • Recharging of natural mineral waters
  • Winemaking
  • Tapping beer and oxidation prevention through contact with air
  • Conservation of wine, unfermented grape juice and fruit juices
  • Medical devices
  • Cold storage / refrigeration
  • Accelerating growth of farm produce as an atmosphere additive
  • Preparation of sodium carbonate, alkaline bicarbonates, lead carbonate and various organic substances (e.g., salicylic acid)
  • Production of paints and varnishes and manufacture of foam rubber

A recoverable CO2 booking for the Nangwarry-1 discovery was estimated by ERC Equipoise Pte Ltd (“ERCE”) by using a method consistent with the PRMS methodology. Under PRMS, volumes of non-hydrocarbon by-products cannot be included in any Reserves or Resources classification. ERCE assessed the sales gas volumes attributable to the Nangwarry-1 discovery using a methodology consistent with that prescribed by the PRMS, with its independent assessment of a Best Case 25.9 Bcf gross recoverable CO2 made for the top Pretty Hill Sandstone of the Nangwarry CO2 discovery (12.9 Bcf net to Vintage).  This compares extremely well with other commercial Otway Basin CO2 fields such as Caroline (~15 Bcf), which was in production for approximately 50 years, and Boggy Creek (~14 Bcf).

A revision of the Nangwarry Field recoverable estimates has been conducted by ERC Equipoise Pte Ltd (“ERCE”) following the successful production test of the Nangwarry-1 well. The revised estimates are as follows: 

Nangwarry Field 

    Gross On-block Recoverable CO
Sales Gas (Bcf)
Gross Gas Contingent 
Resources (Bcf)
 
       Low             Best              High    1C            2C         3C    
Pretty Hill
Sandstone
      9.0              25.9               64.4    0.5           1.6         4.1  
    Net On-block Recoverable CO2
Sales Gas (Bcf)
Net Gas Contingent 
Resources (Bcf)
 
Pretty Hill
Sandstone
     4.5              12.9                32.2    0.3           0.8        2.0  


Notes: 1. ERCE recoverable and resource estimates effective 7 July 2021. 2. Gross volumes represent a 100% total of estimated recoverable volumes within PRL 249. 3. Working interest volumes for Otway Energy Pty Ltd and Vintage’s share of the Gross recoverable volumes can be calculated by applying their working interest in PRL 249, which is 50% each. 4. Sales gas stream for Nangwarry is CO2 gas. 5. These are unrisked Contingent Resources that have not been risked for Chance of Development and are sub-classified as Development Unclarified.  6.  Hydrocarbon gas also includes minor volumes of nitrogen. 7. Contingent Resources will be Consumed in Operations – used as fuel for CO2 gas plant.

PEP 171, Penola Trough, Otway Basin

  • Vintage – earning 25% (operator) with an option to increase to 50%
  • Somerton Energy Pty Ltd – 75%

Recent events

In June 2020, the Victorian Government legislated that the moratorium, banning any petroleum exploration and production in the onshore areas of Victoria, will be officially lifted from 1 July 2021. On that date the first five-year term of the PEP 171 licence was restarted. New regulations are being drafted and an updated exploration program has been proposed and is being negotiated with the regulator prior to the new regulations coming into force.

Summary

PEP 171, comprising an area of 1,974 km2, was awarded in August 2013 for a period of 5 years, with renewal options. In 2020, the Victorian Government legislated that there will be a re-start of the existing exploration licences on 1 July 2021, which will allow Vintage to actively pursue opportunities in this permit from that date.

A revised work program is being negotiated with the regulator, which will involve the potential acquisition of a 3D seismic survey to detail the most prospective leads to select the best prospect for drilling.

Vintage is earning its initial interest of 25% by paying for costs associated with the permit through to the end of the onshore gas exploration and production moratorium period, as well as contributing towards a number of Year 1 restart exploration activities. Vintage has the right to acquire a further 25% interest by contributing 65% of the cost of a 100 km2 3D seismic survey up to an agreed cap.

The prospectivity of the Penola Trough was greatly enhanced by the new field discovery in the Sawpit Sandstone made by Beach Energy at Haselgrove‑3/ST-1. This well was drilled in a nearby licence in late 2017. This well represents a significant new play discovery and has stimulated a renewed phase of exploration in the region.

Following the results of the 2017 Haselgrove-3/ST-1 gas discovery, attention has refocused on the results of the Glenaire-1/ ST- 1 well drilled in PEP 171. This well encountered good gas shows in the Laira Formation and Pretty Hill Sandstone during drilling in 2006. A thickness of 8.8 metres of net gas pay was interpreted in the Pretty Hill Sandstone and a test in the Laira Formation recovered 12 barrels of oil but the well was considered uncommercial. The plan is to correlate the existing seismic between Glenaire-1/ST-1 and Haselgrove-3 ST-1.

Nine leads are currently recognised in the PEP 171 which are primarily fault-bound, dip closures, however the seismic data quality is poor to average, particularly deeper in the section, requiring the 3D survey to identify the optimum drilling location.

GSEL 672 (Vintage 100%)

A Gas Storage Exploration Licence (“GSEL”) was granted to Vintage covering a portion of the South Australian Otway Basin to the south of PRL 249.  To date, activities have been limited to technical evaluation, analysis, and review of potential gas storage options, which include the commercial aspects of those options.

Initial expectations were that Vintage might build a gas production and storage project in the SA Otway Basin, in combination with hydrocarbon gas exploration in the area. This has been complicated by the discovery of CO2 in Vintage’s Nangwarry-1 exploration well, but also opens up the possibility of non-hydrocarbon gas storage in the area.

Vintage Energy

Vintage Energy has been established to acquire, explore and develop energy assets within Australia that will provide gas to the eastern states.

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