The well, which is inside the perimeter of the Loy Yang A power station, is a follow-up to last November’s Boundary Creek-2 well, 70km away on the eastern side of the Baragwanath Anticline, the company said.
Loy Yang-2 is sited on the Loy Yang Dome at the western end of the anticline. Success at this well would significantly upgrade the potential for further discoveries along this structure, Lakes said.
Loy Yang-2 will be drilled in two stages. A rotary drilling rig will firstly drill the “top-hole” to a depth of about 220m in the Latrobe brown coals. The Hunt Energy rig will then move onsite to drill the lower section to a planned depth of 1200m, Lakes said.
With an estimated drilling time of 20 days, Loy Yang-2 is targeting several zones observed in the original 1994 Loy Yang-1A well, about 50m away.
Analyses of these zones have confirmed the similarity to gas-bearing formations drilled by Lakes in the adjoining permit PEP 157, according to the company.
“We are hopeful that through hydraulic fracture stimulation, we may be able to recover gas in commercial quantities in Loy Yang-2,” chairman Robert Annells said.
Annells added that the nearby Loy Yang A & B Power Stations meant gas from the well could be readily brought to market.
“The ramifications for peak load gas-fired power generators would be significant, should we be successful with this well,” he said.
Lakes will fund 100% of the drilling and post-drilling hydraulic fracturing costs, after electing to drill Loy Yang-2 as a sole-risk well.
As a result, Lakes will hold a 75% interest in the defined Loy Yang Block, with AusAm Resources holding the remaining 25% stake.
Lakes Oil and AusAm Resources will continue to each hold a 50% interest in the rest of the permit.
Twelve years ago, the Loy Yang-1A well targeted potential hydrocarbons in the Rintouls Sandstone, with drilling reaching a total depth of 1750m. Lakes said later that 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 and 850m in the Strzelecki Formation. This was ignored because at the time it was believed this formation had no hydrocarbon potential.
Annells said the company sent the electric logs from Loy Yang-1A to the US 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.
If Loy Yang-2 encounters gas similar to that produced by the original well, hydraulic equipment would be used to fracture stimulate both this well and the Boundary Creek-2 well in March or April.
