CHEVRON will not go ahead with stage two of the Nappamerri Trough natural gas project (NTNG) in the Cooper basin, Beach Energy announced.
Beach said Chevron advised that extensive technical evaluation confirmed a large gas resource and potential for further appraisal, but Chevron would not go ahead with the opportunity because it doesn’t align strategically with the company’s global exploration and development portfolio.
Chevron’s spending on exploration is being high-graded and significantly reduced in response to market conditions, Beach said in a statement.
At the time of going to print Chevron had not released a formal statement to the press.
All Chevron equity interests in the joint ventures will return to Beach for nil consideration and no return of stage one capital expenditure is payable by Beach to Chevron.
Beach said it expects to conduct further studies over the remainder of financial year 2015 and into financial year 2016, with minimal spend anticipated over this period.
The company will also pursue future partnering opportunities for the NTNG project.
Icon Energy which holds a 35.1 per cent interest in the project, said the stage two work program will contain ongoing research and development activity and during the year Icon will submit its 2015 research and development claim to the Australian Taxation Office.
If this claim is successful, significant additional funds will contribute to the funding of stage two in ATP 855, Icon said.
Despite the obstacles, Beach managing director Rob Cole said the company considered the stage one exploration program had achieved its primary technical objectives.
“We now better understand the geology through the delineation of target zones and identification of additional targets beyond the early REM shale play,” he said.
“We have also proved the ability to fracture stimulate, successfully flowed gas to surface and tested deliverability. We look forward to progressing the NTNG project at a pace consistent with prevailing market conditions,” Mr Cole added.
In a contingent resources report on ATP 855 conducted by DeGolyer and MacNaughton, the evaluation company said the results showed the flow rates from Etty 1, Hervey 1, Redland 1 and Geoffrey 1 wells passed the discovery test.
DeGolyer and MacNaughton estimated as at 31 December 2014, the 1C recoverable gross contingent resource in ATP 855 has increased by 25 billion cubic feet (Bcf), the 2C recoverable gross contingent resource increased by 943 Bcf and the 3C recoverable gross contingent resource increased by 4,726 Bcf.
“When compared to the flow rates for Halifax 1, the flow rates for the most recdent wells appear much lower and this can be attributed to a reduced number of hydraulic stimulations in the wells and a conservative choke strategy implemented during the most recent flow-testing,” the report said.