Woodside Petroleum is adopting a mainly conservative approach to its 2007 exploration drilling programme, cutting its exploration spend by $88 million from its 2006 budgeted total of about $507 million, as a result of up to 10-fold increases in drilling and seismic acquisition costs.

But there will also be opportunities for some large-scale exploration success among the 24 wells planned for late 2006 and 2007, comprising 13 in Africa, six in the Gulf of Mexico and five in Australia. Among the higher risk prospects on Woodside’s 2007 to-drill list are the Pomboo-1 prospect in a completely untested and unproven basin offshore Kenya which spudded on 2 december; the huge Snarf-1 gas target in the Browse Basin, an offshore target in Libya, with a structure more than 60 km long and 16 km wide, and the Terrebonne-1 prospect in a Gulf of Mexico block that the company acquired for $25 million in March 2006.

Woodside’s Exploration and New Ventures Director, Agu Kantsler, told an investors forum in Sydney recently that commercial success rate for 2006 had increased to just under 50%, up from 25-33% in recent years, reflecting the need to target less risky prospects in the company’s exploration portfolio due to skyrocketing costs.

“A lot of drill rigs are now costing us four times what they used to”, he said. “Recently we had quotes for seismic boats in west Africa up to $1 million a day from a previous base of about $100,000. What that means is we can’t afford to take the risk that we used to take when we could drill wells for less than $10 million, we have to modify our programme.”

Kantsler said Woodside had aimed to drill up to 40 exploration wells in 2006 but this number was cut back to 32, partly due to higher drilling costs on the Gulf of Mexico shelf where the company was targeting some higher risk prospects. “Some of the shelf wells were getting more and more expensive, the risk was still relatively high and after a couple of dry holes we thought that maybe we weren’t quite ready with some of the science.”

Out of the 32 new spud exploration wells planned for 2006, 23 have been completed, with 11 successes, 11 dry and one technical success. The remaining wells were still being drilled when PESA News went to press. Higher costs are set to keep Woodside’s exploration budget to just over $400 million in 2007 with a reduced drilling programme. “Costs are extremely high and now is not the time to be drilling out the higher risk end of your portfolio”, he said.

Australia

Four wells have been programmed off the North West Shelf in 2007 Calthorpe-1, Snarf-1, and two other prospects to be identified from ongoing seismic and controlled source electromagnetic (CSEM) studies near existing gas fields in the Browse and Carnarvon basins.

Kantsler said the Calthorpe-1 prospect, in the Exmouth Sub-basin, is part of the Laverda canyon system, near the Enfield field. He said some clever seismic inversion studies had enabled the Woodside team to clearly discriminate between soft shales, hard shales, water bearing sands and oil or gas bearing sands.

“What the guys have done over the last 12 months is a really clever piece of seismic inversion, and for the first time in the surrounding acreage we’ve got a 100% match of our interpretation of amplitude response”, he said. “Calthorpe came out of that inversion. All of the things that we know are dry, or look very prospective we can see are water wet, but this one popped out as potentially being oil filled.”

Kantsler said he believed Calthorpe-1 had a relatively high chance (about 30%) for an economic success volume of about 33 MMbbl. “This could give us another development option for Laverda”, he said.

“We can then daisy chain these two fields together as a stand alone development or we can daisy chain Calthorpe over Laverda to either Enfield or Stybarrow. It creates more value and that’s a good piece of business coming out of good science.”

One of the high impact wells planned for 2007 could be Snarf-1, to the west of the Brecknock field in WA-275-P in about 1,750 m water depth. “This one is big, it’s potentially up to 6 Tcf of gas and Woodside’s share of the permit is 25%”, Kantsler said. “There is a relatively high chance of success and it’s the sort of structure that is so big you can’t miss it, so it’s a really good shot.”

He said the geology of Snarf-1 was complex and Woodside was finishing off some pre-stack depth migration (PDSM) work to identify the reservoir more clearly. And 3D seismic from Snarf-1 was tied into 3D from the nearby Calliance and Brecknock fields. Snarf-1 will be drilled by the Chikyu drillship after its Kenyan exploration programme has finished.

The two other exploration wells pencilled in for Australia during 2007 will target frontier exploration work, starting with acreage about 180 km from the Pluto field in the outer Exmouth Basin in about 1,000 m water depth. Kantsler said estimates of reserves in the Pluto area had grown from 1 Tcf initially to 4.5 Tcf but potentially could go up to as high as 8 Tcf. with additional exploration success.

“So what we are going to do is go out to this frontier acreage that we picked up a couple of years ago”, Kantsler said. “We’ve shot 2D and next year we will be shooting about 1,500 km2 of 3D. We are outside what we would ordinarily have considered to be the normal charge and migration cell for gas in the Carnarvon Basin but the recent Chandon-1 discovery by Chevron has pushed the limits of how far the gas has migrated beyond what we would have anticipated a few years ago.” For the first time in Australia, Woodside will be using the CSEM hydrocarbon detection technique to see if they can discriminate whether there are hydrocarbons in those structures or not.

The other Australian exploration acreage to come under the microscope will be two blocks closer to Pluto, WA-370-P and WA-269-P, where Woodside has recently acquired about 2,600 km2 of new 3D seismic. Kantsler said the data set was still being screened and evaluated but he believed three or four prospects could be teased out, ranging in size from 300 to 500 Bcf.

“The other thing that we will do in 2007 is reprocess Chevron’s original Chrysaor 3D which is now public file to evaluate what we have in the southwestern corner of the Pluto block”, he said. “So whilst I can’t promise anything, at this stage it does look as though it should be feasible to aggregate another 1-2 Tcf of gas in the immediate vicinity of Pluto. And we would like Pluto to be a public access LNG plant, so we are asking third parties to bring their gas to the plant as well.”

Gulf of Mexico

Woodside will be taking the Jack Bates semi-submersible to the Gulf of Mexico in 2007 to drill three or four deep water wells and maybe a few farmin opportunities as well, due to the overheated rig market. Kantsler said he didn’t anticipate any drilling will take place on their on Gulf of Mexico Shelf (GoM) acreage until the end of 2007 or early 2008. “We wanted a little bit of time out just to make sure that we understood exactly what we were doing, given the pressure on margins there”, he said.

The Jack Bates rig will be dry towed to the GoM and put to work on a two year contract. Kantsler said having the Bates available will allow Woodside to have more control of its drilling programme. “We’ll also be able to farm into some of the majors’ projects that they otherwise won’t be able to get to before their leases expire”, he said.

He said that more than 2,500 deep water leases are due to expire during 2006 - 2007 followed by another 1,500 during 2008 - 2009. “That’s a huge opportunity in terms of our ability to farm in and drill wells that people have worked up but, because of the current global rig shortage, they would not otherwise be able to drill”, Kantsler said. The high turnover was also an opportunity for Woodside to start bidding aggressively on acreage that the majors hadn’t been able drill during the 10-year permit cycles.

“We’re close to concluding our first farmin and it’s a really attractive prospect and the nice thing about bringing a rig is that you get to farmin on a ground floor basis, which is a good piece of business”, he said.

One of the larger prospects in the GoM scheduled for drilling by Jack Bates in 2007 is Terrebonne, in a block Woodside acquired in March this year for $25 million. “It’s a very simple four-way dip closure beneath a salt wing and the objective sequence goes all the way from the Pliocene down to the upper Miocene”, he said. “Currently we are carrying a mean success volume of about 110 MMbbl, and because we own this one with 95% equity we will be looking for farminees. Our intention would be to carry at least 45- 50% of the equity but have the incoming partners carry us through most of the drilling cost.”

Kantsler said an unexpected and exciting development in the GoM this year was the success of BP’s Kaskida ultra deep water exploration well, yielding 800 net feet (244 m) of pay and rumoured to contain about 880 MMbbl in the lower Tertiary Wilcox Formation sands, about 40 km from blocks that Woodside has an interest in. Kaskida was drilled to a total depth of about 9,906 m in a water depth of about 1,786 m.

“The nice thing about that is we believe reservoir is improving as the sand doesn’t have to travel quite as far, and because you are in a part of the basin where everything is more deeply buried, the quality of the oil is significantly improved as well”, he said. Woodside originally picked up acreage in the nearby Garden Banks and Green Canyon protraction areas to look at sub-salt plays.

“That was primarily the middle and lower Miocene but immediately below that is the Wilcox. And now that BP have de-risked that, it gives us another objective that we weren’t originally contemplating pursuing.”

He said the find had renewed interest in the Eocene Wilcox Formation sands in the deep water GoM which were typically fine grained. “Typically it is quite a tight reservoir but in the deep water fold belt more than 6 Bbbl has been discovered in that particular formation”, he said. “And probably the most topical thing recently has been the successful testing of the Jack prospect at 6,000 bopd, but people weren’t too sure just how well that reservoir would perform, given its very fine grained and low permeability nature.”

Kantsler said although that was a relatively low flow rate for a deep water well, he couldn’t imagine that the United States government would not create the fiscal environment to allow the fields to be commercially viable.

Kenya

The first major well of Woodside’s late 2006, 2007 international exploration campaign is in Kenya and will be completed early in the new year. The Japanese drillship Chikyu departed Singapore in early November and spudded the Pomboo prospect in permit L5 on 2 December.

Kantsler said Pomboo is a simple four-way dip closure with a mean success volume of about 300 MMbbl and a P90 – P 10 range of 100 – 700 MMbbl. “However, it is high risk; this is a completely untested and unproven basin”, he said. “While we believe from all of our regional work that a source rock will be present, and while we believe from all of our seismic work that we will see a deep water turbidity facies, we don’t really know.”

There are also plans to drill a second prospect, Sokwe South, in the adjacent L7 permit area, but that depends on the weather. “Sokwe is a little bit smaller with a mean success volume of about 250 MMbbl but it’s a much bigger structure. Its P10 volume is higher but it’s riskier. We believe it’s getting to the southern edge of the charge cell”, Kantsler said.

“But in January a monsoonal current comes down from the north which can reach surface velocities of about 7 knots, and anything above 3 - 4 knots starts to give us operational difficulty. Depending on whether we get the top hole drilled, the well head and riser down and latched up, will dictate whether we’ll actually get Sokwe drilled or not in this current exploration cycle. But we will get at least one of them done.”

Libya

Woodside is getting into Libya in a big way after five onshore wells, two 2D surveys and one 3D survey were completed in 2006. In 2007 there are plans to drill eight onshore and four offshore wells.

“Four out of the five wells that we have drilled to date have been successful”, Kantsler said. “The first well that we completed in NC209 was an oil discovery. We discovered two separate oil bearing formations in a reservoir that hadn’t been tested in that part of the world previously, quite deep at 14,000 feet.” He said that although the discovery was relatively small, between 10 – 20 MMbbl, its location was close to facilities which were within 30 km of the permit boundary and that was a pretty “handy” piece of business.

The other three wells, in NC210, were gas discoveries and further appraisal wells will be drilled to determine the size of the gas column. “However the most exciting thing we’ll probably do towards the end of the first quarter of next year will be the drilling of a reefal feature in block NC206”, he said.

“It’s of Paleocene age and has a mean success volume of between 100 – 150 MMbbl. This onshore play is quite high impact because there are several more of those things that we can follow up on and we are doing some more PSDM to try and tease out the potential.” Two rigs will continue to drill exploration wells onshore Libya during 2007 and there are plans to drill at least eight wells across six onshore contract areas.

Offshore, Woodside has another high impact well; the structure is more than 60 km long and 16 km wide in about 1,000 m water depth. “This is quite a large prospect, carrying a mean success volume of about 800 MMbbl. With the fiscal terms that we have in this part of the world we need about 200 MMbbl at least as the minimum economic field size”, he said.

Brazil

Woodside has also recently acquired a 25% interest in nine exploration blocks in the Santos Basin, off south eastern Brazil, from operator Repsol-YPF, subject to approval from the Brazilian authorities.

The blocks are about 180 km southeast of Sao Paulo in water depths of 150 m to nearly 1,000 m, covering about 2,060 km2. Woodside’s commitment in the first exploration term of four years covers its share of 3D seismic acquisition and one exploration well. A one year extension of the exploration term is possible.