Of prime importance, Conoco Phillips’ US$2.3 billion Bayu-Undan liquefied natural gas (LNG) project will feed gas from Bayu-Undan to a new LNG processing plant near Darwin via a single 500 km pipeline. 

The Bayu-Undan field has recoverable reserves of more than 3.4 Tcf of natural gas and approximately 400 MMbbl of liquid hydrocarbons (LPG and condensate). Stage I of the Bayu-Undan development, the liquids stripping phase, became operational in March 2004.

The second stage, gas development, which includes construction of a $750 million underwater pipeline from the Bayu-Undan field to Wickham Point near Darwin, is currently underway and on schedule. A 3.24 million tonne per annum LNG plant is under construction in Darwin and LNG will be sold to customers in Japan under a 17-year contract, with the first delivery scheduled for 2006.

The success of the Bayu-Undan project has given encouragement to partners in another gas field project, Greater Sunrise. This project will be discussed in detail later in this article. Greater Sunrise is located further north of Bayu-Undan in the Timor Sea. Woodside Petroleum, Shell Australia, Conoco Phillips and Osaka Gas are partners in this gas/gas liquids field.

In addition to gas field projects, the operation of the completed Adelaide to Darwin railway is likely to further stimulate the Northern Territory economy. By 2007, 50,000 containers of international freight are expected to be transported along the route, offering exporters and importers from southern Australia an alternative route to markets in Asia.
 
The energy projects and the development of the rail link have resulted in the expansion of the Port of Darwin. Darwin is now the supply base for the oil and gas fields of the Timor Sea and improvements have been made to the East Arm Wharf ($75 million) and the Wickham Point water supply project.

Other major gas fields in the Timor Sea being considered for development are:
• Greater Sunrise - gas/condensate (Partners – Woodside, Shell, ConocoPhillips, Osaka Gas). Estimated recoverable reserves of 7.7 Tcf
• Evans Shoal - gas/condensate (Partners – Santos, Shell, Osaka Gas). Estimated recoverable reserves of 6.6 Tcf
• Petrel /Tern - gas (Partners – Santos, Origin Energy). Estimated recoverable reserves of 1.4 Tcf
• Black Tip - gas (Partners – Woodside, Eni Australia). Estimated recoverable reserves of 1.1 Tcf.

Development of the petroleum resources in the Timor Sea and bringing gas onshore from the Bayu-Undan field will hopefully be followed by other fields, including Greater Sunrise. These projects will bring substantial benefits and economic growth to Darwin and the Northern Territory.

With its abundant petroleum resources, central location to Asian markets and increasing number of major resource projects in the Timor Sea and beyond, the Northern Territory is ideally positioned to be an energy centre of global significance.

Gross Production OF Energy Minerals (Onshore/Offshore In 2003/04)

Crude Oil (ML) 2517.0 $715,137,804
Natural Gas (GL) 470.1 $ 43,116,680
Uranium Oxide 4668 $184,131,242

Onshore Gas Sales

All of the Territory’s onshore gas production is from the Amadeus Basin, south of Alice Springs. The Territory Government has contracted Magellan Petroleum, who operates Palm Valley, and Santos, who operates Mereenie, to supply the gas needed to generate electricity and these contracts expire early in 2009.

Combined gas sale volumes from the Palm Valley and Mereenie gas fields declined by an overall 4.8% between 2003 and 2004.

Details for the two fields are as follows:
1. Palm Valley: Gas sale volumes declined by 9.10%.
2. Mereenie: Gas sale volumes declined by 2.7% of the same period in 2003.

Onshore Exploration Highlight

The Beetaloo Basin

The Beetaloo Basin covers approximately 8.8 million acres / 35,600 km2 and is patently underexplored. Current exploration operator, Sweatpea Corporation is undertaking major basin studies as part of a renewed exploration effort after a break of 15 years. Unconventional fractured shale oil/gas plays and basin centred gas plays are being prioritised in addition to conventional structural plays. Farm-in opportunities are being made available as the program progresses to seismic acquisition.

The basin contains more than 3,000 m of Precambrian and younger sediments including several thick, rich source rock intervals, the richest of which has reportedly more than 100 m of black, generally oil-prone, shale with a total organic carbon content which typically ranges from 4 to 7% but which can be as high as 12%.

Three thick sandstone sequences also occur within the basin which may represent potential reserves interbedded with the source rock intervals. Large, untested structural leads are also thought to be present. Within the basin there is only about 2,700 km of 2D seismic and 11 wells. Most of the wells are stratigraphic tests, drilled during the late-80s to early-90s by the petroleum arm of a large mining company. Few, if any, of the wells were located with reference to seismically defined structural closures. Nevertheless, oil shows have been reported in several of these holes and free oil has been reportedly recovered on test.

International oil producing areas which are considered to be broad analogues to the Beetaloo Basin occur in North America, eastern Siberia and the Middle East. The upside potential is large but, as yet, unproven, because, despite appearing to have the ingredients for the generation and entrapment of oil, the area is, for all practical purposes, vastly underexplored.

Quite a few things have changed during the 15 or more years that have passed since the last time there was a serious attempt to look for oil in the Beetaloo Basin. Substantial infrastructure has been established in the form of a much improved road link and a new rail line to Darwin, a new gas pipeline has been constructed, and Aboriginal land right agreements have been executed.

Advances made through the efforts of The Northern Territory Geological Survey Division (NTGS)
Many of the geological regions of the NT remain highly prospective for minerals, yet are under-explored by national standards. Hence the Territory Government input through its NTGS.

NTGS continues to provide geoscientific advice to government in regard to land-use issues, work programs, technical performance and policy matters on mineral and petroleum exploration titles. It closely monitors developments in mineral exploration up to the point of resource definition, and regularly reports on progress through the NTGS pages of the Department’s website.

In 2002/03, the division completed the final year of the NT Exploration Initiative, which was a major four-year Government program to boost minerals and onshore petroleum exploration in the NT. This very successful program made significant advances in the geoscientific knowledge of the Northern Territory and resulted in a range of new geoscientific products and services, made available free-of-charge to industry and other stakeholders.

Late in 2002/03, a new mineral and petroleum exploration initiative, Building the Territory’s Resource Base, was approved by the Territory Government.

This new program enabled NTGS geoscientists to focus on enhancing the Territory’s geological prospectivity by providing industry with high-quality, low-cost, new-generation geoscientific data, information and ideas and will build on the success of the previous Initiative.

Petroleum exploration has progressed onshore recently with four new tenement grants and 22 exploration applications in the Beetaloo, Wiso, Pedirka, Georgina and Amadeus basins, responding in part to technical advances promoted by the Petroleum Branch of the Northern Territory Geological Survey.

A recent inaugural symposium on the petroleum geology of the Timor Sea (Bonaparte/Browse Basins), held in Darwin, was organised by the NTGS Petroleum Branch. 31 technical papers and two plenary papers were delivered before more than one hundred international and Australian petroleum geoscientists. Key papers addressed recent discoveries, field studies, new technologies, petroleum geochemistry and many other aspects of the petroleum geology of the Bonaparte/Browse Basins.

In onshore areas, specialised analytical work continued on the Georgina and Amadeus Basins. These results will be published in a number of products summarised on an exploration CD published annually by the Petroleum Branch. An important forum to allow publication of these and other products is the Central Australian Basin’s Symposium to be held in Alice Springs on August 16th – 18th. More than 53 technical papers will be presented at this symposium.

The Petroleum Branch of NTGS is committed to continuing its analytical programs and ‘basin reconstructions’ in onshore areas and a review of the Triassic Simpson Desert Basin will begin in late 2005. In offshore areas, directly as a result of the Timor Sea Symposium, the technical expertise of NTGS will facilitate more direct involvement in petroleum studies in future years. Cooperative joint studies in offshore areas with Geoscience Australia will continue.

Petroleum Resource Management – Activities To End Of 2004 Calendar Year
The objectives of the Department’s Resource Management section are to provide a framework for hydrocarbon to be exploited in a manner that maximises returns to the community.

This is achieved by advising on matters related to granting and maintaining petroleum titles in the Territory and in adjacent Territory and Commonwealth waters; by monitoring oil and gas production; and by ensuring that operators are following pertinent legislation, guidelines and good oil field practices.

Production

The offshore fields, Laminaria, Corallina, Jabiru and Challis continue to produce oil. A decline in oil production and an expected rise in water cut were the dominating features associated with production from these fields.

Onshore, Mereenie continues to produce oil. Mereenie and Palm Valley continue to supply the Territory with the gas needed to generate electricity.

The Northern Territory’s onshore oil production comes only from the Mereenie gas and oil field. The volume of onshore oil sales from Mereenie has declined by 6.3%.

The Northern Territory’s offshore oil production is combined from four different fields: Laminaria, Corallina, Jabiru and Challis. Offshore Northern Territory oil sale volumes has declined by 37.5%.

An Update On Onshore/Offshore Exploration Potential In The Northern Territory

Onshore Exploration

As mentioned previously, the NT contains five major onshore sedimentary basins which are prospective for hydrocarbons – the Amadeus, Georgina, Wiso, Beetaloo and the stacked Eromanga/Pedirka basins. A new study of the Triassic Simpson Desert basin will commence in late 2005. The onshore basins are considered to be underexplored by national and global standards, having collectively attracted less than 10,000 km of seismic and only 108 exploration wells. All of the above basins will be discussed at the CABS Symposium mentioned above, and this symposium will hopefully provide a watershed defining new levels of exploration activity onshore.

Exploration applications and tenements cover 90% of the prospective ground available in the onshore NT and the level of activity is increasing steadily as oil prices surge. Entry into these basins will progressively evolve as farm-in opportunities become available and more tenements are formally granted.

It is important to note that in the onshore Northern Territory in the last four years, 22 new petroleum exploration licence applications have been made by nine new operators and three new permits have been granted in the last year.

Difficulties in negotiating access to prospective land has in the last decade impeded exploration, but recently several new title grants indicate a continued increase in exploration activity as Land Councils are becoming increasingly aware of the communal benefits of measured economic development in their heartlands.

The NT Government, through the Department of Business, Industry and Resource Development and the Northern Territory Geological Survey, is promoting the prospectivity of the Northern Territory’s sedimentary basins which remain largely untested as initial exploration programs undertaken in the 1960s to early 1990s were far too sparse to adequately gauge the region’s potential. It is also true that outdated, misleading geological dogma has hindered petroleum exploration onshore. This now has been offset to some extent by recent NTGS basin studies and the latest geological thinking will be on show at the Central Australian Basins Symposium (CABS).

The most prospective sedimentary basins in the onshore Northern Territory are discussed below: Underexplored Palaeozoic petroleum systems (250 – 550 million years old) occur in the Pedirka Basin (Permian Purni Formation), Amadeus Basin (Ordovician Horn Valley Shale), Georgina Basin ( Middle Cambrian Arthur Creek Formation, Thorntonia Limestone) and also the southeast Bonaparte Basin (Carboniferous).

Following is a basin by basin summary:

The Beetaloo Sub-basin (2 CABS papers):
• A Mesoproterozoic petroleum system (approx. 1400 million years old) is well documented. Over the last 10 to 15 years studies of these petroleum systems by Geoscience Australia, and to some extent the NTGS petroleum branch, has led to an enhanced understanding of the basin’s potential. The basin is currently being explored by Sweetpea Corporation and initial studies have been encouraging; they will be followed up by a seismic program due to commence in the next 12 months.
• This Mesoproterozoic basin includes rich petroleum systems based on Kyalla Formation and Velkerri Formation source rocks and reservoirs in the Bessie Creek, Moroak and Jamison Sandstones.
• The main hindrance to exploration is the long geological time spans required for hydrocarbon preservation, but maturation/expulsion studies that are ongoing indicate generation and expulsion may have occurred far more recently than previously thought. Unconventional play types such as fractured shale reservoirs and basinal gas plays are also being investigated.

Georgina Basin (6 CABS papers):
• Extremely rich, oil-prone microbial source rocks in the Middle Cambrian Arthur Creek Formation/Thorntonia Limestone section are pivotal to the exploration effort and there is evidence of widespread oil migration.
• The facies architecture of the overlying Steamboat Sandstone comprises recently recognised tidal channel and deltaic facies well represented on seismic, but lacking well control. The potential reservoirs are up to 150 m thick. The basin has been unroofed to some degree leading to shallow target depths of 300 – 1000 m and stratigraphic/structural entrapment could be large (> 50 MMbbl oil-in- place).
• Other large stratigraphic plays are Arthur Creek shoals and sandy debris flows, and also Hagen Member shoreline plays, all of which have potential in the tens of millions of barrels.

Wiso Basin:
• This basin has many analogies with the Georgina Basin but a basinal stratigraphic test is required to assess available petroleum systems.
• Any success in the Georgina Basin will stimulate exploration in this western counterpart.
Amadeus Basin ( 7 CABS papers):
• This is a significant producing basin but exploration methodologies lag by 15-20 years.
• Recent studies by NTGS and others show the Neoproterozoic in the Amadeus Basin is an attractive gas target, particularly in the southern portion of the basin where large structural and combination plays could provide a major gas resource via fractured reservoirs (Heavitree Quartzite).

• Exploration is in its infancy but there is potential for large reserves.
• There is also an impetus for gas exploration given the current gas supply contracts for Darwin expire in early 2009 and additional supply for other resource/industrial projects should arise in the next five to 10 years.

Pedirka Basin / Eromanga Basin (1 CABS paper):
• Recent studies by the NTGS have highlighted the Early Permian Purni Formation as an

Southeast Bonaparte Basin:
• This basin hosts several small gas fields onshore and the Turtle and Barnett Oil fields offshore. Source for the latter was originally attributed to the Carboniferous Milligans Formation however Gorter et al., (2004) illustrate that the source is in fact shale in the Langford Group which is separated from the overlying Milligans Formation by a major unconformity.
• This is a major advance in the understanding of this portion of the basin and presents a number of new exploration opportunities. Much of the NT portion of the Bonaparte Basin has recently come under application.

Summary

All of the basins described above are largely under explored by international standards. With the exception of the northern Amadeus Basin, this can be attributed initially to the lack of early success in what are complex basins. The latter can be largely attributed to poor seismic control on many of the features drilled. Later, land access problems stalled exploration and it is only over the last decade modern geological and geophysical concepts, including interpretation of modern airborne aeromagnetics coverage, have been applied to basin studies. However most of these basins are a generation behind the levels of exploration seen in North America and elsewhere.

Offshore Exploration

Offshore exploration tenements are released annually by Geoscience Australia and application documents and technical data are available from this group. There is active turnover of acreage and success rates have shown an improvement over the last 12 months.

The Timor Sea portion of Australia’s North West Shelf should see a resurgence of drilling activity as high oil prices favour exploration fundamentals.

The Bonaparte and Browse basins are major Mesozoic rift basins which have a proven track record and still offer some of the most favourable petroleum systems on the North West Shelf. In the past, the overriding factor favouring oil exploration has been proximity of traps to oil-mature, syn-rift Oxfordian shales, the dominant source rock on the North West Shelf.

New studies have extended the area of influence of the Oxfordian petroleum system and also established the pre-rift, Early to Middle Jurassic Plover Formation as a regional oil and gas-liquids source rock over a much wider area than previously known.

A significant advance is the recognition of the Plover Formation as the dominant source for the Laminaria and Corallina Oil fields in the Bonaparte Basin. Similarly the oil potential of the Cartier Trough in the Vulcan Sub-basin is enhanced by recognition of early Plover Formation oil charge in the Oliver field.

Revision of Plover Formation stratigraphy has also highlighted a new intra-formational reservoir-source/seal couplet about 400 m below the main top Plover target. This new play is an attractive oil target and is being actively explored in the southern Vulcan Sub-basin. Exploration for gas in the northern Bonaparte Basin is also proceeding as sovereignty/royalty issues between Timor and Australia gradually unravel.

The northern Browse Basin was formally perceived as largely gas prone, but evidence from Crux-1 of early oil charge from Oxfordian shales highlights the potential for oil legs in this basin. The main challenge for explorers is the identification of viable traps that have avoided Neogene fault breach and have not been flushed by late stage gas charge.

Spiralling oil and gas prices, plus a surge in exploration ideas as a result of the Timor Sea Symposium may prove to be a watershed in the exploration history of the Timor Sea.

What has happened in the Territory?

Territory’s oil patch in 2004/05

Oil production for 2004 from the Timor Sea totalled 12.1 MMbbl valued at $662 million and the region remains a major oil producer with considerable remaining potential. Following on from the Timor Sea Symposium release CD in 2004, drilling activity offshore during calender year 2004 comprised three exploration wells (Katandra-1A, Ponderosa-1A, and Coot-1A) with Katandra–1A being an oil discovery.

Two development wells were drilled during this period (Corallina-2 and Jabiru-11), but both failed to meet reservoir production targets.

To date in 2005, drilling of Patalonia-1 and Marloo-1 yielded dry holes and results from Vesta-1 are unavailable at this time. A further six wells are scheduled to be drilled in 2005.

During 2004 seven geophysical surveys including 4613 line km were carried out in offshore permits at a total cost of $4.2 million.

Norwest Energy acquired 125 line km of seismic data (Lara 2D Marine Seismic Survey (MSS)]) over AC/P32. The survey was conducted from August 2004 16th – 18th. Hardman Resources acquired 429 line km of seismic data (Rufus 2D MSS) over AC/P25, The survey was conducted from August 18th – 22nd 2004.

Santos acquired 623 line km of seismic data (SNT04B 2D MSS) over NT/P48, extending to NT/P61 and NT/P68. The survey was conducted from August 28th – September 4th 2004.

Santos acquired 136 line km of seismic data (SNT04 MSS) over NT/P67. The survey was conducted between September 6th – 7th 2004.

Nexus acquired 3300 line km of seismic data (Fog Bay 2D MSS) over NTP66. The survey was conducted from September 16th – October 13th 2004.

In 2004 in the Ashmore Cartier area one offshore permit was awarded to Coogee Resources (AC/P34) and a second to Natural Gas Corporation Pty Ltd (AC/P33).

In the Northern Territory adjacent waters area NT/P68 was awarded to Timor Sea Petroleum. Two Retention Licences, AC/RL 4 and 5, were awarded to OMV over the Tenacious Oil field. Applications are currently being assessed for new Retention Licences over the Argus, Crux, Cash – Maple, Petrel and Talbot fields.

The 2004 offshore petroleum release areas occur in the northern Browse Basin (AC04-3 and AC04-4), the northeastern Cartier Trough (AC04-2, AC04-1) and the northern Bonaparte Basin (NT04-1, NT04-2, NT04-3). Applications for these areas are currently under consideration.

The Northern Territory’s onshore oil production comes from the Mereenie gas and oil field which during 2004 produced 0.375 MMbbl valued at $14.9 million. Three development/appraisal wells were drilled in 2004 in the onshore NT. The first in Palm Valley gas field was plugged and abandoned. Two other development wells, East Mereenie-43 and West Mereenie-18 yielded incremental gas flows.

In the onshore Northern Territory three exploration permits were awarded to Sweetpea Corporation in the Beetaloo Basin in addition to one in the Pedirka Basin awarded to Merlin Energy Pty Ltd.

A further 22 applications for onshore exploration permits are currently being progressed through Native Title Issues in the Amadeus, Pedirka/Eromanga, Georgina, Wiso, Beetaloo and onshore Bonaparte basins.

As mentioned, a comprehensive program of geological/geophysical papers will be presented at the Central Australian Basins Symposium in Alice Springs. For details visit the website http://conferences.minerals.nt.gov.au/cabs

Sunrise

The development of the Sunrise gas field is on hold pending resolution of Timor Leste’s claims with respect to ownership of the field.

By way of background:

• The field is located some 500 km northwest of Darwin. It contains some 7.7Tcf of gas and 300 MMbbl of condensate.
• Sunrise straddles the border between Australia (79.9%) and the JPDA (Joint Petroleum Development Area) (20.1%).
• This interest split is recognised in the Timor Sea Treaty which was signed and agreed to in 2002.
• Further, both parties agreed to the Sunrise IUA (International Unitisation Agreement). Australia has ratified this IUA, but Timor Leste has not.

Further points:
• The IUA ratification is a necessary pre-requisite for the developers to proceed as it provides the legal and fiscal framework required.
• During 2004, the Chief Minister of the NT (the Hon Clare Martin) called for a deal to be negotiated separate from maritime boundary resolution to enable the field to be developed, and with a more generous revenue share to be agreed for Timor Leste.
• Meetings during 2004 up until December, including between the two Foreign Ministers, failed to reach agreement. While it appeared that a deal was possible, Timor Leste insisted that the gas be piped to it for an LNG project and no agreement was reached.
• Woodside, as operator, re-assigned the Sunrise project team personnel to other projects in January 2005.
• Subsequently, Australia and Timor Leste resumed its negotiations and there are reports that the main principles of agreement have been reached, but “some details need to be resolved”. The terms appear to include no movement of the maritime boundaries for 50 years in return for a more generous revenue share (from the Australian Government’s revenue share) to Timor Leste. The actual interest split remains unchanged.
• Until this agreement is signed, ratified by both parliaments and a development plan is approved, the project is not able to resume.
• There is confidence that this can be achieved before the end of calendar 2005.

Black Tip and PNG gas

Black Tip
The recent announcement that Black Tip would not proceed for the supply of gas to Alcan Gove was a disappointment.

However, the 1 Tcf of gas in close proximity to the coast of NT is a valuable resource and a number of options will be considered for local markets. These may include existing and potentially new customers and industries.

The Alcan Gove Expansion project is of major importance to the NT and is proceeding irrespective of the Blacktip gas field being developed or not.

The TTP (Trans Territory Pipeline) is also on hold, but could be built at some future date to link in with the existing Amadeus to Darwin pipeline.

PNG gas
While no details of the agreement between Alcan and the PNG projects proponents are available, nevertheless it is expected that the agreement will be conditional on final economics and decision to build. It is regarded that the infrastructure associated with this project will bring a national gas pipeline rid closer to realisation.

Summary

The future looks bright for the offshore/onshore petroleum industry in the Northern Territory. In an era of surging energy prices, global interest in frontier basins is pertinent to the onshore basins of the Northern Territory, which are truly ‘greenfields’ exploration areas caught up in an exploration time warp. The CABS Symposium will provide the latest thinking on these areas.

In the Timor Sea area, the Bayu-Undan project is a success story and with booming LNG markets and the gradual unravelling of sovereignty/royalty issues between Australia and Timor Leste, the future is brightening for other large projects such as Greater Sunrise. Small to moderate size oil pools continue to be discovered in the Timor Sea enticing smaller players to areas like the Vulcan Sub-basin and Cartier Trough where opportunities continue to arise.