Robert Annells
Lakes Oil N.L.

Melbourne explorer Lakes Oil NL is on the threshold of an important new push to prove up commercial oil and gas reserves in its onshore Gippsland Basin acreage in eastern Victoria.

With its newfound Canadian partner PetroHunter, via the subsidiary Sweetpea, Lakes expects to begin drilling campaigns in recently granted retention leases during the second quarter of 2007.

It will also drill two wells in an exploration permit (PEP 166) further to the west.

This will lead to an intense four or five well fraccing program by the end of the year employing a specialised rig and treatment techniques to unlock reserves of oil and gas in tight formations already known to be present through Lakes’ earlier exploration work. These results will hopefully lead to commercialisation of the area.

The drilling will begin in PEP166 where Lakes will increase its interest from 50% to 75% by paying the cost of two wildcats. The first, Hazelwood-1 located just to the south of the Hazelwood power station, will target the same tight Cretaceous-age Strzelecki Group sands that tested oil and gas in the company’s nearby Loy Yang-1 drilled in 2006.

This will be followed by a rank wildcat further to the north called Boola Boola-2 – a prospect first drilled in the 1920s, which encountered oil shows, but was never tested.

Attention will then move to PEP 158 were two exploration wells, Napier High-1 and Alberton-1 will be drilled.

It is yet to be decided whether Lakes and PetroHunter will then elect to move the rig to the newly granted retention lease which encompasses the southern section of the former PEP 157 where Lakes has already made a number of gas discoveries such as Trifon, Wombat and Boundary Creek, again in the extensive Strzelecki Formation reservoirs and may drill Boundary Creek-3 or Wombat-4. Both are enticing proven tight gas plays.

The intention is to follow up the drilling with a back-to-back fraccing program under the supervision of PetroHunter. The farminee has specialised knowledge and success with similar tight formations elsewhere in the world, notably in the US.

The fracturing program will envolve re-entering Hazlewood-1, Trifon-2 and Wombat-1, 2 and 3 as well as previous wells Boundary Creek-2 and Loy Yang-2 which have already been cased and suspended awaiting the frac treatment.

The program involves the fracture stimulation of Strzelecki reservoirs in each case to a lateral penetration of approximately 500 ft radius from the well bore.

This will set a new fraccing standard in Australia and Lakes expects the results will be much improved on earlier attempts which had much shorter frac lengths. The point is highlighted by the fact that Wombat-2, will be added to the program. Even though it was fracced several years ago and has a measured substantial flow rate of 680,000 cubic feet per day it is believed the flow can be increased by extending the current fractures and by fracturing other zones in the well.

In parallel with this work, Lakes will also revisit the old Lakes Entrance oilfield.

The field is held in a second recently granted retention lease excised from former permit PEP155.
The shallow (300 m depth) ‘greensand’ reservoir contains proven reserves of viscous oil that has been produced in the past, but with difficulty. Lakes plans to study several pumping techniques in an attempt to find a commercial solution to this problem.

The company has recently cemented ties with the Lakes Entrance community by supporting an initial two-year sponsorship of a local football club.

In addition, Lakes Oil is progressing plans to establish a public picnic and park area incorporating a historic oil industry display surrounding the unique heritage-listed Lakes Entrance oil field shaft and storage tanks.

Both Lakes and PetroHunter are convinced that the key to unlocking the elusive onshore Gippsland oil and gas reserves is within their grasp.

For more information contact:
Lakes Oil N. L.
Tel: +61 3 9629 1566
Fax: +61 3 9629 1624
Web: www.lakesoil.com.au

Lakes Oil testing gas from the Strzelecki Formation at Wombat-1