By Sarah Byrne
CARNARVON Petroleum managing director Adrian Cook explained the delay on results from the company’s Phoenix South discovery and the consequences of low oil prices, at a recent luncheon at the Australasian Oil & Gas conference in Perth.
Speaking with Oil & Gas Australia, Mr Cook said after waiting the past six months since the discovery was made, it is natural for shareholders to want the results of the Phoenix South discovery as quickly as possible.
However, Mr Cook said it was important to let Apache do its work and conduct a detailed study of the area to gain a better understanding of the potential of the basin.
The company had not seen this type of oil characteristic in this type of reservoir before, so the joint venture was starting from scratch in regards to working out the volume and recovery factors of the discovery, he said.
“We need to be a little more patient while the technical work is undertaken,” he said.
An update on the current work on Phoenix South is expected at the end of March, however, the results of the seismic study which began in January isn’t expected until the end of 2016, Mr Cook said.
In the meantime, Mr Cook said the partnership was interested in the potential of the area and flagged the possible opportunity of owning the whole basin.
Volumes at the Phoenix South deposit were not at the top of the company’s priority list, Mr Cook said.
“This is a much bigger project than we had originally contemplated,” he said.
Mr Cook provided a positive outlook on the price of oil, he said Carnarvon is looking at the market in a long term sense with the understanding that the price of oil is likely to remain low in the short term and then increase to around $80 per barrel of oil in the medium to long term.
Mr Cook said the plummeting price of oil is bound to have an effect on the development of Phoenix South but he remains confident in Carnarvon keeping its cost structure stable and remaining strong in the low oil price environment.
The majors are expected to defer expenditure and cut costs, Mr Cook said, the timing of the project and drilling is expected to be impacted by Apache and most of the majors reducing their headcount and cutting capital expenditure.
Apache’s commitment to the seismic study hasn’t been effected by the need to cut costs, which Mr Cook said is a positive.
Mr Cook stressed the importance of the industry having a moderate response to the current low oil prices.
“We have seen the oil price is down, shareholders scream, management take action by cutting costs, which in this business is people.”
“If we let these people go, we are going to lose a lot of very senior and experienced people,” he said.
Cuts to company expenditure are necessary in the present low oil price environment, but Mr Cook said it is important to retain skilled staff to ensure the industry doesn’t create a skills shortage.
Continuing to innovate and develop new technologies and invest in people working in the oil and gas industry were key points made by Mr Cook when discussing the way forward in the development of the North West Shelf.
“With the North West Shelf ’s “low hanging fruit” already picked, thinking and acting differently provides a clear path to future exploration success,” Mr Cook said in his keynote speech.
Carnarvon’s next step for 2015 is to drill at well at its Roc prospect in WA 437 P some time this year.
The joint venture believes Roc is a more prospective target than Phoenix South and has the potential to be a significant commercial discovery, if recoverable oil is found, Mr Cook said.
Carnarvon’s sale of its Thailand assets ahead of the drilling of the Roc well, has ensured the company has the financial resources to remain an active participant in the joint venture through the next phase of development, Mr Cook said.
Discussing opening up a new oil province on the North West Shelf, Mr Cook said he believes the “Phoenix South discovery could trigger the beginning of a renaissance on the North West Shelf and be a catalyst for a new wave of exploration around the Australian continental shelf.”