By Lauren Barrett

APACHE Energy has recorded what its project partner says is a significant discovery offshore Western Australia.

Project partner Carnarvon Petroleum told the Australian Securities Exchange that the confirmation of four discrete oil columns at the Phoenix South 1 well in the offshore Canning basin was “one of the most significant developments in Australian oil and gas in recent times.”

Preliminary permeability estimates at the permit area indicate the potential for a productive reservoir, the company said, with six oil samples recovered with API gravity of 46 to 48 degrees.

While the amount of recoverable oil found has not been disclosed, Apache, with a 40 per cent stake in WA-435-P, said permeability measurements from the sampled zones indicated a productive oil reservoir, with preliminary estimates suggesting there might be as much as 300 million barrels of oil in place.

Although evaluation is at an early stage, Phoenix South-1 is an exciting result,” Apache’s executive vice president and chief operating officer – International Thomas Voytovich said.

The drilling outcome is an equally exciting result for Carnarvon managing director Adrian Cook, who said the well had delivered a significantly better outcome than he could have imagined.

“We’re very excited, but we are trying to be cautious as well going forward until we get the next stages of evidence,” Mr Cook told Oil & Gas Australia.

The light nature of the oil discovered is a boost for Carnarvon, with the discovery being touted as one of the most significant developments for the Australian industry in recent times.

The oil discovery also came as a surprise to the joint venture partners given the initial mud logs reported on by BP in the early 80s looked to be gas bearing.

Carnarvon acquired the first 3D seismic in the permit area, and along with advanced drilling and logging sampling techniques Mr Cook said it had a real advantage over where the BP team were 30 odd years ago.

An oil development can be done more quickly, more easily and more cheaply than a gas development, meaning the find could be rapidly developed if proved commercial.

The rest of this year will involve analysis of the data obtained from the drilling program, with Carnarvon confident that further technical evaluation of log and core data will put it in a position to confirm the discovery’s commercial viability by the year’s end.

The news came as Apache exercised an option to take 40% equity in the neighbouring WA-436-P and WA-438-P permit areas, with Carnarvon to retain a 30% interest.

In exercising the option, Apache and project partner JX Nippon confirmed they would drill the Roc prospect in WA 437 P, agreeing to pay earn-in costs to a cap of US$70 million.

Carnarvon managing director Adrian Cook said he expected the Roc well would be drilled in 2015 with an Apache-contracted jack-up rig.

Mr Cook said the Roc well was potentially a bigger and better reservoir.

“If we can prove up the Roc structure, believe it or not, the Phoenix South structure becomes the tie back, given Roc is in shallower water,” Mr Cook said.

Mr Cook said he was still assessing the implications of the discovery for the remainder of the company’s surrounding 20,000 square kilometres, but noted that what it could involve was “potentially quite staggering.”

The discovery generated a huge amount of market excitement, with the company’s shares climbing almost 200% to close at 24 cents on the day of announcing the find.

Mr Cook said the hype around the discovery indicated that the sector had missed out on this kind of excitement for some time now.

“There’s been a focus on the shales and the activity in the US, and we haven’t had a lot of activity that’s been materially successful along the North West Shelf beyond just gas,” he said.

“I’m hoping we invigorate exploration activity, with all of that enthusiasm and knock on effect for the small players in the oil and gas space as well the bigger players.

“It would be great to kick off some excitement and it would be great for Carnarvon to be part of that and be part of a bigger industry initiative.”

Carnarvon holds a 20% stake in the Phoenix South-1 well. Along with Apache, JX Nippon and private company Finder Exploration make up the JV.