Geology

South Australia is situated between the ancient Archaean Shield of Western Australia and the mobile orogenic belts of the eastern states. As a result of this tectonic setting, the geological record in South Australia has preserved a unique history of sedimentation from the Neoproterozoic to Ordovician, and from the Early Devonian to Cenozoic.

Pre-Cenozoic sedimentary basins of South Australia are shown in Figure 1. These basins may be subdivided into three groups based on their relative age:

• Basins of Mesozoic age which either overlie older intracratonic basins or are developed on the rifted southern continental margin of Australia. Onshore, these include the Eromanga and Simpson Basins in northern SA and the Berri Basin (Renmark Trough). Offshore are the Bight and Otway Basins, which also extend onshore, and the Polda Basin.

• Permo-Carboniferous to Early Triassic basins which overlie early Palaeozoic basins in northern and southern parts of the state. These include the Cooper, Pedirka (incorporating the Eringa Trough) and Arckaringa Basins in northern SA and the Nadda Basin (Renmark Trough).

• Early Palaeozoic basins of Cambrian to Ordovician age which include the foreland style Warburton Basin, extensional Arrowie and Stansbury Basins and intracratonic Officer Basin. The latter three basins are underlain by extensive Neoproterozoic sediments which are largely unmetamorphosed and thus also prospective for hydrocarbons. The Officer Basin contains a Devonian section preserved in a foreland trough setting.

The Cooper and Eromanga basins comprise Australia’s largest onshore petroleum province. Permian and younger sedimentary basins beyond the main producing region contain similar largely non-marine sequences in intracratonic settings. Continental margin basins on and offshore have very thick Cretaceous fill and include the Otway Basin, a proven gas province. In several instances there are identified, mature source rocks for petroleum in lacustrine and marginal marine settings associated with reservoir sands. These occur not only in Permian and Cretaceous rocks, but also in basins with thick Neoproterozoic to Ordovician clastics and carbonates with additional source potential in marine settings (Figure1).

South Australia has large regions of interpreted high crustal temperature associated with buried Mesoproterozoic granite intrusives at depths over 3 km, and these form important geothermal exploration targets where blanketed by insulating sediments. Other geothermal energy plays in South Australia include:

• hydrothermal energy from the Great Artesian Basin,

• residual heat sources in the Otway Basin around Australia’s most recently active onshore volcanoes,

• radiogenic iron oxide deposits similar to Olympic Dam and Prominent Hill, which may have even higher heat flow than the granites, and

• enhanced natural thermal systems (e.g. Paralana Hot Springs and associated fracture zone) (Figure 2)

Exploration review

South Australia has a long history of petroleum exploration, dating back to 1866 when the first oil well was sunk near the Otway Basin. Now, nearly all of the petroleum prospective parts of the state are currently under licence or application. Mature producing basins such as the Otway and Cooper are almost fully licensed and are the main focus of current onshore exploration effort. The next major acreage releases in these basins are planned in 2008-2009.

The grant of eight new PELs in September has doubled the area under licence in SA from 66,109 km2 to 140,225 km2. A total of 46 petroleum exploration licences (PELs) and 32 petroleum exploration licence applications (PELAs) cover >85% of the state’s onshore petroleum prospective areas (Fig. 3). To date, the relevant registered native title claimants, petroleum explorers and the State Government have concluded access agreements for a total of 36 license areas – seven in the Arckaringa Basin, 28 in the Cooper Basin and one in the Officer Basin. All of these South Australian agreements cover the full cycle of petroleum activities including exploration, development and production (Figure 3)

The petroleum potential of the state is considered to be at least as significant as discoveries made to date. New explorers in the Cooper and Eromanga basins have sustained world-class success rates and flank areas remain under-explored. The offshore Otway and Bight basins and the onshore Officer Basin are considered to have potential for giant new petroleum field discoveries. Onshore oil plays in the Otway Basin, Arckaringa Basin and a number of frontier Cambrian and older basins as well as the State’s CSM potential also remain under-explored.

Cooper Basin
Cooper Basin drilling activity is heading towards record levels in 2006-7 and this will add to the number of new field discoveries for explorers. Cooper Basin exploration activity in 2006 is forecast to include 45 wells and 2,300 km of 2D seismic, based on guaranteed work programs. There will also be a significant increase in Santos Joint Venture Cooper Basin oil appraisal and development drilling this year with a major project which could see up to 1000 wells drilled in the SA and Qld Cooper Basin over the next five years. Santos reported in late August that 42 wells in the program have been drilled in Queensland with 37 successful. Approximately 400 wells are planned to be drilled in the SA Cooper Basin as part of this project
(Figure 4)

Since January 2002, a total of 46 exploration wells and eight appraisal/development wells have been drilled by the new explorers in the Cooper Basin. Most have targeted oil, however both oil and gas have been discovered. The new entrants found new oil pools in 57% of their 46 exploration wells and achieved a respectable 44% commercial exploration success rate through to July 2005. The 38 new commercial fields are Acrasia, Aldinga, Arwon, Cadenza, Callawonga, Christies, Crocus, Derrilyn, Flax, Frostillicus, Ginko, Harpoono, Hoek 1A, Hornet, Juniper, Kiana, Kiwi, Lightning, Middleton, Mirage, Nutmeg, Padulla, Paprika, Paranta, Reg Sprigg West, Revenue, Rimfire, Sellicks, Silver Sands, Smegsy, Stimpee, Stimpson Jay, Teringie, Toparoa, Udacha, Ventura, Worrior and Yarrow (Figure 5).

This year, 21 exploration wells have been drilled in the Cooper Basin to mid September 2006. Twelve of these have discovered new petroleum accumulations and have been cased as future producers. There have been eight new oil fields and four new gas fields discovered this year.

In the five year term (January 2002 – August 2006), the Santos joint venture has drilled 184 new wells in joint venture PPLs (15 exploration – four successful and 11 abandoned; 26 appraisal –24 successful and two abandoned; and 143 development - 136 successful and seven abandoned). This corresponds to commercial success rates of 27% for exploration and 95% for appraisal and development.

Santos has made two oil discoveries thus far in 2006 in South Australia – Frostillicus 1 and Stimpson Jay 1. Victoria Petroleum encountered sufficient oil shows at Lightning 1 in April 2006 in the to justify casing for later testing for commerciality.

Another significant milestone in 2006 is the first flow of ‘new entrant’ gas through the Santos operated Moomba facilities. Great Artesian Oil & Gas is the first of the new entrants to the Cooper Basin to commercialise a gas field (Smegsy 1), which is now flowing gas to market.

The South Australian Cooper Basin remains a very rewarding, attractive destination for petroleum exploration investment and further valuable discoveries are inevitable. The first round of mandated partial relinquishments of Cooper Basin exploration licences commences in October 2006 and this acreage will be consolidated into blocks for a major new acreage release in 2008-9 totalling
19,150 km2.

Onshore Otway Basin

Exploration is also ramping up in the onshore SA Otway Basin. This year, one well and 230 km of 2D and 30 square kilometres of 3D seismic acquisition are included in company work programs. Next year, up to six wells and 30 km of 2D seismic acquisition are planned.

In July, a release of vacant acreage in the onshore Otway Basin (OT2006-A, Jacaranda Ridge 1 oil discovery), attracted five bids totalling $47 million from national and international explorers. Adelaide-based exploration company Adelaide Energy Pty Ltd was the successful bidder. The winning bid involves more than $13 million in exploration investment over the next five years, of which around $7.3 million
is guaranteed.

A release of consolidated vacant acreage in the onshore Otway Basin for work program bidding is planned in 2008-9.

Frontier basins

Frontier acreage in the Officer, Arrowie, Pedirka, Simpson, Arckaringa and Murray Basins is currently under application for oil and gas exploration. All of these basins are under explored by world standards.

Seven new PELs (PELs 117–119 and 121–124) were granted to SAPEX Ltd in the Arckaringa Basin in September, for oil and CSM exploration. Before the seven Arckaringa Basin PELs could be offered, pursuant to the Commonwealth Native Title Act 1993, it was necessary to conclude Native Title land access agreements over the areas to be licensed. Native Title land Access agreements were expeditiously concluded between SAPEX, the Yankunytjatjara/ Antakirinja native title holders, the Antakirinja Matu-Yankunytjatjara native title claimants, the Arabunna native title claimants and the South Australian Government through the Right to Negotiate (RTN) process in September 2006. These native title agreements enabled offer of the seven new Arckaringa Basin PELs to SAPEX. SAPEX have also been granted PEL 120 in the State’s mid-North to explore for CSM.

An exploration well is planned by Austin Energy in PEL 73 over the Early Palaeozoic Stansbury Basin this year. The well is located to test a play concept developed by reinterpreting detailed aeromagnetic data acquired under the South Australian Exploration Initiative.

The Officer Basin has nine areas under application within freehold Aboriginal land — PELA 81 and PELA 253 by Officer Basin Energy Pty Ltd and PELAs 138, 140, 141, 142, 143, 147 and 148 by Standard Oil and Dawnpark Holdings. PELA 139 (Standard Oil and Dawnpark Holdings) is located outside of freehold Aboriginal land; the RTN provisions under the Native Title Act were initiated and negotiations were successfully concluded in November 2003.

Four areas in the Arrowie Basin (PELAs 131–134) are under application by Meridian Resources Pty Ltd. Grant of licences over these areas is subject to resolution of native title issues with the RTN process having been instigated in relation to PELA 132.

Two adjoining applications by Murray Basin Petroleum (PELAs 137, 152) are under consideration for the Renmark Trough region of the Murray Basin. Grant of the area north of the river will be subject to resolution of native title issues.

An application from Eden Energy Ltd is currently under consideration for a Petroleum Exploration Licence (PELA 183) targeting Neoproterozoic sediments on the Stuart Shelf. The application covers an area of approximately 7,620 square kilometres.

Offshore exploration

All offshore South Australian basins are only lightly explored by world standards. However potential exists for giant petroleum accumulations in the Otway and Bight Basins where recognised exploration targets are similar to those in prolific gas/oil provinces elsewhere in world where gas finds dominate trends close to shore and oil dominates in deeper water off the Continental Shelf (Figure 6).

There are five offshore exploration licences in the Bight Basin – four operated by Woodside and 1 operated by Santos. There are now five offshore exploration licences in the Otway Basin, following award of two new permits in August 2006. Great Artesian Oil and Gas, Kerr McGee and United Oil & Gas each operate a permit and Exoil Limited are the operator of the two new permits.

Offshore exploration activity in 2006 includes geological and geophysical studies and seismic acquisition, representing an exploration investment of approximately $10.4 million. Results of this work will be applied towards locating exploration targets and drilling up to eight wells by 2009, with over $68 million expected to be spent exploring these basins.

Coal seam methane

Nine PELs are current for coal seam methane exploration in the State. Six PELAs are under consideration for exploration rights for coal seam methane and/or in situ gasification over coal deposits, as listed below and shown in Figure 7. Grant of these licences is delayed pending resolution of issues of conflicting rights with coal leases under the Mining Act; some will also involve native title issues.

• Strike Oil — PEL 127 was granted in June 2005 over the Kingston Coal Deposit.
• SAPEX — PEL 117–119 and 121–124 were granted in September 2006 in the Arckaringa Basin and PEL 120 over Tertiary coal deposits of the northern Adelaide Plains. SAPEX are also targeting oil in the Arckaringa Basin.
• Centrex Resources — PELA 126 and 153 over the Lock coal deposit (Polda Basin).
• Corporate Developments Pty Ltd — PELA 174 over the Sedan coal deposit.
• Planet Gas has lodged applications over interior Tertiary non-marine basins — PELA 145 (Lake Eyre Basin) and 146 (Walloway and Willochra Basins).
• Merrill Gray – PELA 219 over the Moorlands coal deposit.

Production

There are 206 petroleum production licences (PPLs) and offered PPLs in place in the Cooper and Otway Basins. The value of petroleum produced in 2005-6 is A$1.0 billion and the cumulative value of petroleum produced since 1967 in South Australia is estimated as A$25.32 billion in today’s dollars. Since 1991, the average royalty paid equals 7% of the sales value.

Geothermal exploration licences

The South Australia Government is leading Australia with expeditious and effective processing of activity approvals for geothermal energy, and the last couple of years have seen a rush for licences to explore a variety of geothermal energy plays.

Table 1. South Australian petroleum production, 2005-06

Since 19 August 2004, over-the-counter applications for geothermal exploration licences (GELs) can be accepted over the entire state, except over current GELs or lands excluded from exploration (e.g. certain parks). At end September 2006, the 96 GELs and GELAs in South Australia covered 45, 148 km2 (fig. 8) with aggregate five-year work programs to a value of $514 million. This represents 90% of all geothermal licences in Australia. Licence holders include Geodynamics Ltd, Scopenergy Ltd, Petratherm Ltd, Eden Energy Ltd, Green Rock Energy Pty Ltd, Pacific Hydro Ltd, Geothermal Resources Ltd, Proactive Energy Developments Ltd, Osiris Energy Pty Ltd, Origin Energy Resources Ltd and Torrens Energy Ltd (Figure 8).Geodynamics Ltd is operator of GELs 97 and 98 has first mover advantage in Australia with its Habanero project in the Cooper Basin in NE South Australia and is the only proponent with a proven resource in its tenements. All other proponents in Australia still have to prove geothermal resources exist in their tenements. Geodynamics “Proof of Concept” project (Habanero) is located where rocks are hottest in the Cooper Basin (approximately 300ºC at 5 km depth).

The company has created the world’s largest underground heat exchanger by successfully fracture stimulating the natural fracture system within granites through high pressure water injection in two stages in 2003 and 2005. High rates of injectivity into the heat exchanger indicate the presence of large areas of low impedance reservoir where the rock temperature is 250ºC (4.3 km).

Flows of up to 25 L/sec and output temperatures of 210ºC (fig 9) have been recorded in Habanero 2 during production testing in April 2005 without appreciable pressure depletion. The company has experienced difficulty in re-entering Habanero 2 with on site rig equipment, and they plan to mobilise more suitable equipment to either re-enter drill a side-track from Habanero 2 or drill a replacement well in the first half of 2007. A flow test between the two Habanero boreholes will follow as a further step towards demonstrating commercial viability.

The potential area of accessible hot rocks extends for more than 1000 km2. The great distances from electricity markets are not considered a problem since external consultants reports indicate transmission costs of less than 0.8 cents per kilowatt hour to the national grid. Geodynamics was the recipient of a $6.5 million START grant in 2003-4 and a $5 million REDI grant in 2005 and has recently applied for a $75 million LETDF federal grant to partially fund a 40 MWe geothermal power plant at Moomba. The company aims to build a 2-3 MW demonstration plant using Kalina Cycle technology to supply electricity via a 60 km power line from its Habanero project site to Moomba.

Woodside and Origin Energy, major investors in Geodynamics, provided well design software and planning expertise.

Scopenergy Ltd is focused on searching for water in hot sedimentary rocks in proximity to recent volcanic activity in the South East of South Australia, around Millicent. The company holds contiguous GELs 170, 171, 172, 173, 184 and 212 covering substantially all of Australia’s most recently active volcanic province (5,000 yrs BP).

The company conducted a slim hole (100 mm) drilling program in the first quarter 2006, seeking to confirm several large scale heat flow anomalies previously measured in 19 petroleum exploration wells and 26 water wells in the vicinity of its tenements and is presently evaluating the results of the temperature logging program that was conducted in July 2006.

Scopenergy’s areas are well served by 275kV and 132kV transmission lines. Scopenergy’s business model seeks to generate conventional geothermal power from water at or above 170°C in proximity to recent volcanic activity and the existing electricity grid. The company is the recipient of a $4 million Australian Government REDI grant to fund an extensive drilling and 3D seismic program and also successfully secured a PACE 2 grant of $130 000 to partially fund its South East drilling program. Scopenergy is currently a privately owned company.

Green Rock Energy Ltd commenced exploring GELs 128, 129, 161, 162,163, 206 and 213 around BHP Billiton’s Olympic Dam Mine. Negotiations are continuing on grant of licences for GELAs 164 and 165 over the mine. The company drilled Blanche No 1, its first exploratory diamond geothermal well, in the second half of 2005. The well was drilled to a depth of 1,935 metres through 718 metres of sediments and 1,216 metres of homogenous hot granite. The temperature measured was 85 degrees C at 1.9 km depth. This granite body is interpreted to persist to depths of 6,000 metres near Blanche No. 1 and cover an area of about 400 square kms of the GELs and represents a potential geothermal resource in excess of
1,000 MWe.

Green Rock was the recipient of a $68,000 Round 3 PACE grant in December 2005 for the Olympic Dam Geothermal Energy Project and the Blanche Prospect and plans to drill a second well near Blanche 1 in early 2007.

Petratherm Ltd listed on the Australian Stock Exchange in July 2004 after a successful public offering and is operator of GELs 156, 157, 158, 178, 179 and 180 in the Mt Painter region and has lodged GELAs 241 and 242 in the Renmark region. In 2005 the company drilled gradient test wells to approximately 600 m at two sites associated with exceptionally high heat producing granites in the Mount Painter region. Results from both wells were outstanding, with the Yerila 1 well at the Callabonna site returning an average temperature gradient of 680C per kilometre and Paralana 1B well at the Paralana site returning an average gradient of 810C per kilometre. In 2006 the company deepened its Paralana 1B well to 1807 m and recorded a temperature of 109ºC. The average temperature gradient of 500C/km is amongst the best recorded gradients in Australia and provides confidence that an economically viable resource of 200ºC will occur at a final depth of 3600m. Petratherm successfully secured a PACE 2 grant of $140 000 in July 2005 to partially fund its Paralana Project drilling programme. The Paralana-1B DW1 geothermal test well result paves the way Petratherm to now consider the feasibility of moving to the third stage of its project to develop a commercial geothermal resource in far north South Australia.

This stage would drill two new wells nearby to Paralana-1B DW1 but up to twice the depth of the test well, to prove up the expected thermal resource, undertake circulation tests and establish an underground heat exchanger.

The drilling and circulation work would be a precursor to developing an electricity generation plant at Paralana of around 7.5 Megawatts capacity to supply local demand.

Geothermal Resources Ltd holds two hot dry rock projects over high heat flow areas and is operator of GELs 181,208,209,210 and 222 in the Lake Frome region and GELs 214, 215, 216 and 217 in the South East. The company has also lodged GELAs 249 and 250 in the South East. In both cases the model is based on ‘hot’ radiogenic granites that are buried by a sufficient thickness of insulating sediments.

The Frome project lies within the Mesoproterozoic Curnamona Craton, which is characterized by some of the most radiogenic granites in Australia, associated with numerous historic uranium occurrences. In the project area a large body of granite, evidenced by a regional gravity low and non-reflective seismic responses, is interpreted to lie beneath 2-4 kilometres thickness of younger sedimentary cover rocks. Geothermal Resources has been awarded a $100,000 PACE 3 grant by the South Australian government to assist with deep drilling for the purposes of obtaining reliable heat flow measurements over the interpreted buried granite complex. Drilling of five exploratory geothermal wells is scheduled for the last quarter of 2006 in the Lake Frome region.

The Crower project situated in the South East lies along the northern onshore margin of the Otway basin where early Palaeozoic granites of the Padthaway Ridge dip beneath onlapping Jurassic to Cretaceous sediments. Rapid changes in thickness of the sediments caused by basement faulting and rifting at the time of continental break up provide the opportunity for locally elevated geothermal gradients and optimal depths of burial.

Both projects are well located with respect to existing power grids and even modest geothermal fields could be quickly brought into production to meet the rising demand for clean renewable energy. Geothermal Resources listed on the ASX in 2006 and was recently awarded a $2.4 million REDI Grant to fund its geothermal projects

Pacific Hydro Ltd is exploring for sediment-hosted geothermal heat in the Great Artesian Basin for a 400MW conventional geothermal project.

Pacific Hydro holds 18 Geothermal Exploration Licenses covering 9,000 km2 and has successfully completed year 1 of its GEL work program to delineate the resource and define exploration targets. Temperature logging of deep water wells in the Birdsville Track region during 2006 has confirmed high temperature gradients of 500C/km which is one of the best recorded in Australia and provides confidence in developing a geothermal resource of ~1300C at depths of 2 km.

Eden Energy Ltd has been granted GELs 166, 167 and 168 over the Gawler Craton, 169 and 185 in the Cooper Basin, 177 over the Birdsville Track Ridge and GELs 175 and 176 over a heat anomaly in the Murray Basin. Eden Energy was established by Tasman Resources in June 2004 as a wholly owned subsidiary, with a focus on hydrogen and geothermal energy.

The company is pursuing a prospecting-style strategy, aiming to test a number of different geothermal target types, ranging from the deep hot fractured granite model near Moomba and at Mungeranie, relatively shallow (2-3 km) heat sources associated with buried radiogenic iron oxide and granite at Witchellina and enhanced permeability zones in the Renmark Trough associated with elevated heat flows. If successful, Eden will target electricity markets and clean hydrogen production. Eden Energy was the recipient of a $21,000 PACE 2 grant in July 2005.

Torrens Energy Ltd is a new entrant to the geothermal sector and has been awarded 10 geothermal licences (GELs 226 to 235 inclusive) over three project areas covering the Lake Torrens region, the Mid North and Adelaide environs in 2006. All the GELs lie within the Torrens Hinge Zone and Adelaide Geosyncline and are coincident with the SA Heat Flow Anomaly. The company has undertaken heatflow estimates and temperature modelling within and adjacent to its licence areas. Preliminary modelling indicates the high potential for viable geothermal resources within licence areas that are coincident with markets and infrastructure.

Osiris Energy Pty Ltd is a privately held Australian company and a new entrant to Australian geothermal exploration and development. The company was formed to locate, define and exploit geothermal resources suitable for power generation and other ancillary uses requiring energy in the form of heat. In 2006 it was granted GELs 220 and 221 that lie adjacent to existing geothermal exploration licences in the Cooper Basin in the northeast of the State has lodged GELA 223 over the Penola Trough region of the Otway Basin in the State’s southeast. Osiris perceives an opportunity in combining the expertise and methods available in the petroleum, mineral and energy sectors.

Proactive Energy Development Ltd is a privately held company that plans to explore for hot rocks at intermediate depths in proximity to the existing high voltage grid to connection to Olympic Dam. Proactive has commenced geotechnical model building in GEL207 Roxby Downs in SA, and plans to commence exploration drilling in early 2007. The company has also lodged GELAs 251 and 252 to the west of Olympic Dam.

Origin Energy Resources Ltd has recently lodged an application (GELA 224) in the vicinity of the Katnook and Ladbroke Grove gasfield in the Otway Basin.

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