January: Explorers target new Cooper oil trend

Following early encouragement from its September 2006 Growler discovery, Victoria Petroleum began an exploration program aimed at proving up a new northwest Cooper Basin oil fairway.

The rain-delayed Wirraway well was finally completed in April and confirmed as an oil find. But Ascender-1, drilled in September, was a dry hole.

Nevertheless, other explorers Beach Petroleum, Great Artesian Oil & Gas and Cooper Energy found VicPet’s western flank fairway story persuasive.

Beach and Cooper had good results with Parsons in November, and Beach and Great Artesian have begun a two-well exploration program in their PEL 91 permit.

The first of these wells, Ballaparudda-1, was a non-commercial discovery, but the partner said the oil shows found increased the likelihood of finding a commercial oil accumulation with future wells. The second well, Murrippi-1, is expected to spud in February.

VicPet will also be drilling the Warhawk and Gannet structures in this fairway in the first half of 2008.

April: Deepwater plunge

Australia's deepwater regions will see as much activity over the next three years as they have in the past three decades, according to Woodside Petroleum new business manager Terry Walker.

Of Australia's 1040 offshore wells, only 61 have been drilled in water more than 500m deep and only one in water more than 1500m deep, but this is about to change.

Walker told APPEA 2007 that deepwater explorers have committed to at least 14,300 square kilometres of 3D seismic surveys, 17,500km of 2D seismic surveys and 36 wells over the next three years.

As in the past, most upcoming deepwater activity is targeting the gas-prone areas of the Greater North West Shelf.

April: Explorers dive into offshore Perth Basin

Frankland-1, the first hole in a Roc Oil-led joint venture’s three-well offshore Perth Basin campaign, delivered a sweet gas find.

The partners went on to also find hydrocarbons at Dunsborough-1 and Perseverance-1. Roc Oil said Frankland and Dunsborough had the best chances of being developed, but Perseverance was unlikely to make the grade.

Since then, the joint venture, which also involves Arc Energy, has announced it would probably relinquish the WA 325-P permit, which contains the Perseverance discovery. But Arc and Roc will retain WA 286-P, which holds the Frankland gas find and the Dunsborough oil discovery.

In November, Roc announced plans to drill an appraisal well at Frankland, and an exploration well at the Lilac Prospect near Dunsborough.

April: Jubilation at Julimar

Apache Energy made a major gas find at its Julimar prospect on the North West Shelf. Indications are that the field may contain more than 1 trillion cubic feet of gas.

Another discovery followed 5.8km away at Julimar East-1. Both wells tested at 85 million cubic feet of gas per day.

Two months later, Apache made its third consecutive gas find on the Julimar trend, with its Brunello-1 exploration well flowing 72.5 million cubic feet of gas and 1230 barrels of condensate per day on test from a single pay zone.

June: Exploration spending up but reserves replacement down

The Australian Bureau of Agricultural & Resource Economics said petroleum exploration expenditure rose 64% in the 2006-07 financial year to reach $2.14 billion.

This spending was the highest in real terms since 1982-83, or 74% higher than the annual average over the past 25 years, according to ABARE.

But a June report by US investment bank Bear Stearns found that most major oil companies around the world are not replacing their reserves, even as project costs continue to rise.

Reserve replacements last year, excluding acquisitions and divestitures, were 91%, a further fall on 2005's 92% replacement rate.

At the same time, the majors' exploration and development costs rose to $US13.63 per barrel of oil equivalent, up 28% from 2005, according to the report.

The report said increases in exploration and development costs were largely driven by the need to extract oil from more technically challenging areas, such as deeper waters and rugged terrain.

August: Prelude to LNG

Shell has reported a major gas discovery at its Prelude prospect in Browse Basin permit WA-371-P.

Prelude could well be an extension of the giant Ichthys gas field in the neighbouring permit held by Japanese major Inpex and France's Total.

Meanwhile Santos has said early next year, it aims to drill the Ichthys North prospect in partnership with Inpex and Total.

But it wasn’t all good news. About 120km south of Ichthys, Shell and Nexus Energy spudded the Fossetmaker-1 appraisal well, at their Echuca Shoals prospect. This ambitious step-out well, 7km east-northeast of the Echuca Shoals discovery well, intersected a relatively thin and tight gas column.

The market took this as an indication that the prospect was unlikely to support an LNG project and Nexus’ share price took a beating.

August: More gas in Bass Strait

The Exxon Mobil-BHP Billiton joint venture announced it had found 300 billion cubic feet of gas in Gippsland Basin waters last year, adding to the additional 700 billion cubic feet reserve announced at the end of 2005.

ExxonMobil Australia chairman Mark Nolan said having extended the lives of the company's Bass Strait oil and gas fields to more than 20 years and 30 years respectively, the major was launching a study into the untested gas potential of deeper geological structures underneath existing discoveries.

August: Jacaranda boosts hopes for onshore Otway

Jacaranda Ridge-2, junior explorer Adelaide Energy’s follow-up well to the non-commercial Jacaranda Ridge-1 oil discovery, found not oil but gas and condensate.

The well flow-tested 250 barrels of condensate and 2.5 million cubic feet of gas per day.

By September, the well had been placed on production test of 4.4 million cubic feet of gas and 164 barrels of condensate per day through a 24-inch choke at 955psi.

The company plans to follow-up the discovery with two more appraisal wells and remains hopeful that its PEL 255 and the onshore Otway in general is prospective for oil.

August: Big gas find near Scarborough

BHP Billiton made a major gas find at its Thebe-1 exploration well, in the Exmouth Plateau, offshore northwest Australia.

Drilling of Thebe-1 began in the first week of July in block WA-346-P and the well encountered a 73m gas column.

BHP is operator and holds a 100% stake in the field, which represents the company's second significant gas discovery in the basin after Scarborough, about 50km south and shared 50-50 with ExxonMobil.

August: Arc starts Canning campaign

Arc kicked off a major Canning Basin exploration program, spudding the high-risk Valentine-1 well in permit R1.

Hopes were that Valentine-1 could yield up to 1 trillion cubic feet of gas plus 200 million barrels of oil. But by September it was apparent that the well would not be commercial, due to poor porosity and a lack of hydrocarbon shows in the primary target.

Based on these results, Arc decided to stop drilling and plug back the well in order to sidetrack into the nearby Stokes Bay targets.

Stokes Bay-1 found shows in the primary Anderson Formation and Arc deepened the well to test the Nullara level, the carbonate reef level that produces oil at Blina.

But ongoing testing of this zone into November failed to provide conclusive results about whether the Nullara Formation would yield hydrocarbons at this location. Then the arrival of the wet season forced Arc to abandon operations here until next April.

While it was testing Stokes Bay-1, Arc spudded a third well, Valhalla-1, in its 100%-owned EP 371 in late November.

Arc reported elevated gas levels and minor oil shows while drilling through several secondary targets. It said this boded well for when the well penetrated the primary objective, as it demonstrated hydrocarbon migration into the Valhalla structure. But borehole problems forced suspension of the well. A later sidetrack is likely.

October: Flax waxes, Juniper jumps

Cooper Basin junior Innamincka Petroleum saw its share price surge after it confirmed that its Flax and Juniper fields are actually one large field and could hold up to 120 million barrels of oil in place.

A sidetrack well found that Flax and Juniper are connected and the saddle between the two fields is oil-saturated.

Previously, the combined area of Flax and Juniper had been calculated at about 33 square kilometres. But now Flax-Juniper is believed to cover about 120sq.km.

But the Flax-Juniper area is known for its tight sands and the recovery rate is likely to be relatively low.

Even so, a $US65 oil price and a 15% recovery rate would see Innamincka and partner Seoul City Gas extracting 18 million barrels or $US1.17 billion worth of oil. Innamincka's share of this would be about $US877.5 million. Continuing higher oil prices and/or a higher recovery rate could see Innamincka do much better than this.

Innamincka said the company was focused on getting the wells into production and was aiming for 1000 barrels of oil a day from five wells by the middle of next year.

October: Marina-1 a duster

Operator ExxonMobil reached total depth of 2359m at the high-impact Marina-1 well without finding any commercial hydrocarbons.

Drilled in the Bonaparte Basin about 345km south-southwest of Darwin, the well was targeting up to 200-235 million barrels of oil in place in three potential reservoir intervals. But it intersected all three of its objective formations without finding anything more than traces of petroleum.

However, junior partner Drillsearch Energy emphasised that residual oil and gas shows had proved an active hydrocarbon system in the permit, with migration of hydrocarbons to suitable traps.

October: Cooper Oil Project disappoints Santos

Santos announced it would scale back its $1 billion Cooper Oil drilling program due to disappointing exploration results. Santos said it had run short of new prospects in its Cooper Oil Project (COP) and so had cut back its drilling program from 200 wells this year to about 90 wells next year.

The Santos-operated program is being run in several different parts of the Cooper Basin and in different Santos-led joint ventures. COP partner Beach Petroleum said the program was continuing to deliver good results in Beach acreage and the company believed it Cooper acreage still had great promise.

December: Tight gas for tight gas market

WA is now on the brink of a serious domestic gas shortage, and the State Government has released for competitive tender WA's first 'tight gas' acreage block – thought to contain more than 388 billion cubic feet of gas.

State Resources minister Francis Logan said the West Erregulla block, east of Dongara, was believed to contain enough gas to meet WA's entire domestic gas demand for more than one year.

'Tight gas' is found in rocks with a low permeability, making it hard to extract and requiring specialised drilling and fracturing techniques.

Substantial tight gas reserves are known to exist in the South-West and Lower Mid-West, but were previously thought to be economically unviable.