Empire said its expensive, protracted assessment of the RGN-1 discovery earlier this year, in pursuit of additional gas for its hungry gas plant appeared to flow a substantial quantity of oil from the previously overlooked Cattamarra C Sand. 

 

Empire had suspicions there was something different about the flow rate, given it appeared to show a liquids ratio of 400 barrels of condensate per million cubic feet.

 

Samples were sent off to the labs, and textbooks consulted, and it suggests that Red Gully North-1 is a volatile oil pool that was separating into gas and condensate at surface, once away from the reservoir pressures. 

 

"Fifty years ago WAPET drilled for oil and found gas. Now we have drilled right next to a gas field and we found oil," Aitken said.

 

"For me this opens up a play in the Perth Basin.

 

"We haven't found any other field in the basin yet that produces oil from the same zone, certainly in EP 389. There was some oil at EP 432; a well near our Raven project had some oil from the Cattamarra, but it wasn't volatile. 

 

"I think the Mt Horner field had Cattamarra oil. It was a low-producing field, but it produced for ages.

 

"What is different here is the flow rate of 400bopd."

 

Empire's exploration team is now looking for bypassed hydrocarbons in the Cattamarra C Sand across the basin, where the oil may have been mistaken for gas on the logs.

 

"We are going through every well and every bit of data we have, because the C Sand has been tested in a number of wells, and we are asking if it was properly tested, was there fluorescence and what was the porosity. 

 

"It might come up with some gems, wells we already have that haven't been tested in this area, because you tend to go to the gas zones that look good on the logs, and you drill through these zones quite quickly, and you don't test them."

 

When Empire next shoots seismic in the north of EP 389 it will also be looking for further C Sand leads.

 

While Red Gully North-1 did generate a significant amount of water on test, almost 740bbl per day, that is less problematic for an oil discovery than the gas discovery that was initially targeted, Aitken said. 

 

"In the US that would be a fantastic discovery. We are looking at this as a mature oil field, because you could buy one of those with a 60% water cut and still do something with it," he explained. 

 

"We will need to handle the water, by trucking it away and treating it with reverse osmosis, and we have a couple of different options.

 

"We have Gingin West-1 that we will deplete over the next few months, and over the long term that's where we could re-inject the water.

 

"We are drilling next to a 50-year-old WAPET well, and we thought 2-3TJpd of gas next to our plant would be nice, but now we have 400bopd we can probably develop very quickly. 

 

"We are really looking forward to the EPT, which will generate some cash."

 

Part of a planned extended production test will be about trying to assess whether the water is coming from the Cattamarra Coal Measures, or if it is coming from another formation and getting into the wellbore because of a compromised cement job.

 

The focus of the EPT will be on assessing how much oil is in the reservoir and how it will flow over time. 

 

Only once the EPT has been completed the company can estimate the commerciality of the field, and potential a standalone development or a tie-back to the Red Gully plant.

 

During the EPT the gas will be flared.

 

"Three months should be sufficient, because you wouldn't want to flare gas you can sell, but that pipeline the 4km to the plant is $3-4 million, so you don't want to spend that until you know the hydrocarbons are there to support the investment," he said.

 

The set-up could be a condensate plant and separator at Red Gully North and a gas tie-back to the existing plant.

 

A reservoir fluid study will be completed next month, and should give an indication of the size of the prize. 

 

The BP refinery at Kwinana is in negotiations to buy the oil from the EPT, and has already purchased the 1050bbl produced during earlier testing. 

 

Empire already has most of the equipment on hand for the EPT from its earlier flow testing, although it is working on a final configuration. 

 

Most likely the company will use a downhole jet-pump system for artificial lift to maximise oil recovery in the C Sand and handle produced water volumes, and as similar method may be used in the D Sand, as the test data shows it has not fully unloaded completion brine lost during initial completion operations.

 

Aitken said perseverance was the key to the Perth Basin.

 

"So often people have been drilling for one thing and finding another. The Waitsia discovery was drilled for something else, and they drilled a rathole and found Waitsia below Senecio.

 

"I think [Red Gully North-1] has opened up something new in the area in the same way [Buru Energy] opened up Ungani with a high flow rate … while looking for something else." 

 

Empire shares soared from 21c to 25c on the news.