Nexus told the Australian Stock Exchange yesterday afternoon that Longtom-3 had been drilled to a depth of 112m in a 36-inch hole.
Once 30-inch casing is set, Nexus plans to continue drilling the well to a planned total depth of 3330m to intersect the target sands.
The pilot hole will then be plugged back and the horizontal well bore drilled through the Longtom gas sands.
Managing director Ian Tchacos told EnergyReview.net the company expected to learn whether Longtom-3 was successful after it reaches total depth on or around July 26.
“We’ll know where we stand once we intersect the reservoir at total depth,” Tchacos said.
“A successful result would mean we’d start progressing the Longtom development – ultimately meaning first production for the company.”
While Tchacos is “very optimistic” of a positive outcome, he said an unsuccessful result at Longtom-3 would not necessarily spell the end for the development.
“It’s unlikely we’ll end up with no gas at Longtom,” he said. “Failure at this well means we might need to drill further appraisal wells before entering the development phase.”
Longtom-3 is part of a sole risk appraisal program operated by Nexus, which has increased its best estimate of the Longtom gas field by 38% to 438 billion cubic feet of possible gas reserves.
In December, Nexus signed a gas sales and processing agreement with Santos for up to 450 petajoules of gas from Longtom. Accordingly, the two companies have now started front-end engineering design studies on the project, with the aim of making a project sanction decision in the fourth quarter of this year.
Following the completion of Longtom-3, the resource size will be reviewed and the development plan finalised. Nexus expects first production before June 2008.
Apache Northwest, which has a 62.5% interest in Vic/P54, has a right to buy back into the field development following the drilling of Longtom-3 by paying Nexus six times the cost of its share of the project, plus back costs associated with its share of the program.
Meanwhile in Vic/P39, the company says the Galloway-1 well pad is now complete and a rig is currently being mobilised.
The Galloway-1 exploration well will be drilled from an onshore location by deviating the well into the offshore exploration block Vic/P39 (v) near Seaspray in southeast Victoria.
Last year, Nexus acquired 250km of 2D seismic data in the permit and delineated two structural closures, the Galloway and Angus Prospects.
Nexus said the seismic data indicates that Galloway is more likely to contain oil than gas. If the structure is oil bearing, it has a mean probability of containing a recoverable volume of 28 million barrels.
“An oil discovery at Galloway-1 has the potential for significantly better economic returns than a similar discovery offshore as it could be rapidly brought onto production due to its onshore drilling location,” Tchacos said.
“In addition, significantly lower costs are expected for development and production operations at this onshore location than at any offshore location.”
Santos and Tap Oil are both farming-in to Vic/P39(v) through the drilling of Galloway-1. The post farm-in interests in the permit will be Santos (operator with a 37.5% interest), Nexus Energy (Aust) with 37.5% and Tap (Shelfal) with 25%.
