The Loy Yang-2 well is within the area fenced off for the Loy Yang A power station.
Permission for the well has been granted by the Loy Yang A power station. Lakes is now seeking approval from the Department of Primary Industries.
The well would be 50 metres from the original well and any gas discovered would be brought to market via a nearby gas-fired power station, Lakes said.
Twelve years ago, the Loy Yang-1A well targeted potential hydrocarbons in the Rintouls Sandstone, with drilling reaching a total depth of 1,750 metres. Lakes said that later age dating of the terminated depth indicated the well might not have reached its target.
But Loy Yang-1A did encounter gas between a depth of 375 to 850 metres in the Strzelecki Formation. This was ignored because at the time it was believed this formation had no hydrocarbon potential.
Lakes chairman Rober Annells said the company sent the electric logs from Loy Yang-1A to the USA for assessment, using the “latest computer modelling for ‘tight gas’.”
“The results have encouraged us to re-drill the well and to fracture stimulate the gas section, should it be justified,” Annells said.
The company plans to use the Hunt rig, currently onsite at its Boundary Creek-2 well.
If Loy Yang-2 encounters similar gas to the original well, hydraulic equipment would be used to fracture stimulate both this and Boundary Creek-2 in March or April this year.
“As both these wells are on the Baragwanath Anticline and are approximately 70km apart, the significance of success should not be underestimated,” Annells said.
“Lakes believes that this is an exciting well with the ability to significantly upgrade PEP 166 and the Strzelecki Tight Gas project, which it is developing in PEP 157.”
Lakes has also reached an agreement with joint venture partner Ausam Resources to excise out an area in PEP 166 to be known as the Loy Yang Block.
Within this area, Lakes will earn an additional 25% interest to acquire a total 75%, by funding all the well’s drilling and fracturing costs.
Lakes and Ausam will continue to hold a 50% interest in the remainder of the permit.
Funding for Loy Yang-2 was obtained yesterday via a placement of 50 million shares at two cents each.
