EP(A)111 and EP(A)124 are south of the Mereenie oil and gas field, and Santos was granted the right to secure a 50% option when it told its half interest in the field to Central in 2015. 

 

Santos later sold out of the field to Central's likely buyer, Macquarie Group, on January 1.

 

The move is the strongest indication yet that Santos is considering ramping up operations in the Southern Amadeus Basin because it likes what it sees based on seismic shot to date.

 

Santos, and Central, have undertaken extensive work identifying exploration prospects and leads in the Southern Amadeus area, looking primarily at the Mt Kitty, Palm Valley Deep, Dukas (EP112 and EP125) and Sculthorpe (EP112 and EP111) targets.

 

The first well of the farm-in, in which Santos offers to carry all seismic costs and well costs to $12 million, Mt Kitty-1, was drilled to target the Heavitree Quartzite.

 

While the main target was absent, gas was intersected in high-angled, naturally-fractured Mesoproterozoic basement, flowing at over 500,000 cubic feet per day.

 

The expectation is that the fractures could extend much deeper than the 150m logged considering extensive thrusting of basement evident at Mt Kitty and the extent of fracture zones observed in fractured basement analogues in Vietnam. 

 

Under a range of scenarios crunched by the JV partners, if Mt Kitty is a four-way dip closure it could host recoverable resources of 61Bcf of gas and 29.7Bcf of the even more valuable helium (P50), while if it is a fault-dependent structure it could contain 38Bcf gas and 18Bcf helium.

 

Helium is worth about 10 times the gas price, because it is not often successfully trapped, however in the Southern Amadeus Basin there is a pervasive salt layer that, based on the scant few wells drilled to date, has acted to trap the gas.

 

A lot of the focus of the recent seismic in EP 112 (Central 60%, Santos 40%) and EP 125 (Central 30%, Santos 70%) has been on the potentially giant Dukas prospect. 

 

While not well imaged at this stage, gravity data has been used to generate two scenarios.

 

Under the first, the Heavitree reservoir high is overlain by the thick Gillen Salt unit, similar to the earlier Magee-1 well that flowed 50,000cfpd on test from a think 4.5m, whereas the Dukas reservoir appears to extend over 500m. 

 

Data suggests the potential for 2.4Tcf gas and 493Bcf He.

 

However, given the Heavitree Quartzite was missing at Mt Kitty a second theory suggests Dukas could be another fractured basement play with 1.25Tcf gas and 255Bcf helium.

 

Further work over EP112 (Central 60%, Santos 40%) and the newly acquired EPA 111 suggests the Sculthorpe prospect has similar potential.

 

Under the Heavitree Quartzite scenario the prospect could host 728Bcf gas and 149Bcf helium, or 176Bcf gas and 36Bcf helium under the fractured basement scenario. 

 

Generally, Santos needs to commit to drilling in any permits this November, and it has around one year to complete the work to move to 70% in any permit where it elects to drill a well. 

 

Outside the Southern Amadeus JV, other targets owned by Central, and covered by contingent value notes offered in the takeover, which Macquarie is not obliged to drill, are Ooraminna and Palm Valley deep, two of the most promising targets.

 

Palm Valley Deep is 100% owned by Central is a prospect underneath the existing Palm Valley field with a potential relief of 350m, within an anticline that covers around 30km.

 

The Palm Valley well was discovered in 1965. 

 

The field produces from the Lower Stairway and Pacoota Sandstones at depths of up to 2300m below surface from a low porosity and low permeability rock matrix, but there is potential for 242Bcf in the Arumbera Sandstone which reservoirs gas at the Dingo field, and the undeveloped Orange field to the east. 

 

Ooraminna is considered Central's best appraisal prospect outside of Mereenie, as it is just 30km from the Dingo facilities and the proposed Ooraminna-3 well would focus on a zone of predicted high fracture density some 8km earlier vertical wells that flowed between 12-50,000 cubic feet per day.

 

The earlier Ooraminna-2 well encountered little fracturing, but a follow-up well could unlock 150PJ in the Pioneer Sandstone. 

 

Assets such as Ooraminna and the potential workovers and re-completions at of Mereenie field could unlock 120PJ (2C) in the Stairway Sandstone reservoirs which lie above the producing Pacoota Formation, but success requires a pathway to market.