“It certainly could be a company-maker for Nexus,” Nexus managing director Ian Tchacos told EnergyReview.net.

“The gas resource is similar in size to the Casino field and we now have a 100% stake in the asset.”

Apache still has an option to buy back into the development, but exercising this option would cost it about $66m, payable to Nexus.

Nexus has been a big believer in the potential of the field, but Apache lost interest after a second drill stem test on Longtom-2 did not flow hydrocarbons to surface, seemingly indicating reservior damage.

While this was enough to make Apache pull back from the field, Nexus was a minnow with a lot riding on the success of this field.

The company went over the data and soon concluded that the test had not been conducted properly.

“Our analysis showed that production test 2 on the well almost certainly failed not becasue of reservoir problems but because a downhole test valve remained closed throughout the test,” Tchacos said.

“It didn’t flow because a shut valve wouldn’t let it flow.”

“Apache and Nexus have differing technical opinions on this subject, but we have called in independent experts to check our interpretations and our reserves estimates. Given their positive findings and the fact that core samples indicate excellent porosity and permeabilities, we see no reason not to develop Longtom.”

Helix RDS Ltd, a large independent petroleum engineering and production technology consultancy, reviewed data from the production test and agreed with Nexus’ assessment.

Nexus then asked Gaffney Cline and Associates, a major independent energy consultancy, to undertake an independent audit of recoverable gas resources in the Longtom gas discovery. GCA’s recoverable gas resource estimates rangedd between 193 bcf (low estimate) to 435 bcf (high estimate), with a 316 bcf best estimate, confirming that the reserves were large enough to support a commercial development.

“The gross value of the Longtom gas resource is approximately A$1 billion based on the best estimate resource,” Tchacos said.

“The discovery is close to existing pipelines, only 12km from the Patricia/Baleen project and clsoe to the Eastern Gas Pipeline that connects the Longford gas hub to Sydney.”

Nexus has also had strong unsolicted approaches from other energy companies seeking to acquire a position in Longtom.

“A large equity interest in the asset puts Nexus in a stronger position with the opportunity to sell down its holdings to provide funds for development of the asset if Apache do not buy back in due to the large back-in penalty,” Tchacos said.

“We are looking at all options. We may not call in partners but if we are offered good deals we will consider them.”

For now, Nexus is focusing on securing a gas market and a preferred field development option before drilling the Longtom-3 appraisal well planned for September 2005. The company intends to drill the well so that it can be completed as a producer, providing the opportunity to fast-track the development of Longtom.