Drilling in the Canning Basin is expected to begin in April or May next year using Century Rig 18, following the conclusion of Arc’s Perth Basin drilling season, according to managing director Eric Streitberg.

"The Perth Basin and Canning Basin drilling seasons are almost exactly counterpoised, so we can use the rig in the Perth Basin during the Canning Basin ‘wet’ and then take it up to the Canning during the ‘dry’," he said recently.

This approach provides continuity, efficiency and the maximum number of exploration wells, according to Arc.

Arc has acquired eight leases from European Gas (formerly Kimberley Oil) and has another four areas under application, giving it a dominant position in the basin, much like its position in the onshore Perth Basin.

In an investors' presentation yesterday, Arc said the Canning had suffered from a lack of systematic exploration and the company was planning to rectify this with an aggressive drilling program.

"The basin has only been sporadically explored. It has the same number of exploration wells as the Perth Basin, but it is 10 times bigger in area," Arc said.

Arc undertook a major regional review of Canning Basin in 2001, but was not in a position to continue with the project because of its Perth Basin was consuming its available focus and resources.

Oil was found in the Canning Basin in the early 1980s at Blina, Sundown and Lloyd. But according to Streitberg, the discoveries in some ways did the industry a disservice because they focused attention on the carbonate reef and shallow sediment prospects and little attention was paid to the deeper sections of the basin that had higher potential.

The largely unexplored deeper sequences have now been shown to have classic reservoir/source pairs and much better seals than the shallow sections, he said.

The lack of commercial discoveries after the initial 1980s discoveries, largely because of declining effort, deterred other explorers, and the basin returned to being a backwater, Streitberg said.

But Arc believed persistence and rethinking the approach to exploring the Canning could now allow it to unlock sizeable petroleum resources in the same way it has in the Perth Basin.

The Canning has a large number of play types with proven petroleum systems, according to Arc.

Streitberg said the Devonian reef production was analogous to Alberta, Canada. The area also had major sub-salt potential analogous to Oman and huge anticlines in Permo-Carboniferous strata.

Prospect sizes ranged from small fields right up to billion-barrel structures.

"The principal issue is to focus on the right areas," he said.

"Geological, not operational, challenges are the main risk."

Arc has 100% in each of its Canning Basin blocks.

The company prefers to have high equity and operatorship in its permits, according to Streitberg.

"This gives us control over timing, budgets and project delivery," he said.

"We see junior partners in other projects suffering delays and cost overruns and not being able to influence what is happening."

One wonders if Streitberg had Cliff Head and its 25% cost blowout in mind when he made these comments.

He conceded this model would not work offshore as higher costs meant a compnay of Arc’s size could not go it alone, but said onshore the company was determined to keep control of its own destiny.

Streitberg said Arc preferred onshore acreage because of the relatively low capital and operating costs and short cycle times to production.

Being a midcap player, Arc was big enough to handle projects on its own and to keep them running smoothly, but small enough to be able to focus on small-to-medium sized onshore fields.

A company the size of Arc had the resources and skills but also the nimbleness to turn projects around quickly and have them on-line rapidly and cost-effectively using the Mobile Early Production System (MEPS) arc and Origin Energy had developed for the onshore Perth Basin, he said.

MEPS is a mobile oil field production facility made up of storage tanks, a separator and a loading facility. It has a capacity of 3000 barrels of oil per day and can easily be moved from one well to another.