SYDNEY-based AWE has discovered a new gas field in its Perth basin joint venture with Origin Energy, the company has told the Australian Securities Exchange.

Following on from the recently anElevated gas shows and multiple hydrocarbon bearing formations were encountered at the Senecio-3 well in the L1/L2 permit area, which reached a total depth of 3,370 metres in early September.

AWE said wireline logs from the primary target Dongara/Wagina tight sand reservoir identified a significant gas discovery in the deeper sands below the primary target, which has the potential to contain a substantially larger volume of gas.

That larger volume could be the largest conventional onshore gas discovery in Western Australia since the 1960s, AWE said following initial contingent resource estimates for the secondary target.

The company estimated the Kingia/High Cliff Sandstone intervals in the Waitsia field have gross contingent resources in the range from 65 billion cubic feet (bcf) to 1170 bcf, with a 2C best estimate of 290 bcf.

This interval had not been penetrated in this part of the Perth basin previously, AWE said, adding that further evaluation and appraisal would be required to more accurately define the size of the accumulation and the lateral extent of the conventional and tight gas bearing sands.

The company was also evaluating the gas bearing intervals in the Irwin River Coal Measures and Caryniginia Shale which could provide substantial additional unconventional resource potential.

AWE estimates that the Irwin River Coal Measures has gross prospective resources in the range from 114 bcf to 1497 bcf.

While AWE said further evaluation and appraisal would be required to establish whether reservoir productivity will be sufficient for commercial development, it estimates the chance of development at 20 per cent.

An early production scenario is enhanced by established infrastructure, with AWE indicating it would use existing gas plant and pipeline infrastructure just 7 kilometres from the Senecio-3 location.

AWE managing director Bruce Clement said it was a fantastic result for the company and the Mid-West region.

“AWE believes the Senecio/Waitsia discovery could represent the largest onshore conventional gas discovery in Western Australia since the Dongara gas field was discovered in the 1960s,” he said.

“There is also substantial upside to this initial estimated gas volume that could be realised by successful appraisal of the Waitsia discovery and exploitation of the unconventional gas potential identified in the Carynginia Shale and the Irwin River Coal Measures.”

The company is now turning its attention to flow testing of Senecio-3 to establish commercial viability and the potential early, low cost development of the Senecio and Waitsia fields.

“If successful, this could deliver significant additional gas into the Western Australia domestic market and provide substantial value to AWE shareholders,” Mr Clement said.

“Gas production from the Senecio field with a low cost tie in to the AWE-operated Dongara Gas Plant, 7km to the west, would be a logical first step in commercialising unconventional gas in the onshore Perth basin and would reinvigorate the gas industry in the Mid-West of Western Australia.”

AWE has cased and suspended the Senecio-3 well in preparation for conventional flow testing of multiple reservoir intervals in the Senecio and Waitsia fields later in 2014.

A Waitsia appraisal well is also under consideration for drilling in early 2015.

The conversion of Contingent Resources to Reserves is subject to successful flow testing and a final investment decision for field development. If developed, Senecio/Waitsia will add about 30 million BOE, or 33 per cent, to AWE’s 2P Reserves of 91 million BOE.

AWE holds the operating share in the L1/L2, with both it and Origin owning a 50% stake in the permit area.