Central Petroleum boss Richard Cottee is all for the development of a gas pipeline linking the Top End to the east coast gas markets.

Central Petroleum boss Richard Cottee is all for the development of a gas pipeline linking the Top End to the east coast gas markets.

By Lauren Barrett

FRESH from the start of production at its Surprise oilfield, Queensland-based Central Petroleum has reached a series of key milestones in 2014.

Central acquired Magellan Petroleum Australia’s Dingo and Palm Valley assets in February.

It was also the first company to secure a production licence in the NT in three decades, with the granting of the Dingo gas field licence in May.

But as managing director Richard Cottee tells Oil & Gas Australia, it’s only the beginning of his vision to turn the small company into a large one.

Despite Central’s recent success in the NT, Mr Cottee is sure there is plenty of upside potential remaining for the company as it seeks to leverage the current minerals boom.

At the same time, the company is pondering ambitions of opening up the NT gas pipeline system to the rest of the eastern seaboard market.

Central also sees a golden opportunity at the Mt Kitty 1 exploration well in the Amadeus basin, a partnership with veteran explorer Santos.

Santos has a 70 per cent operating stake in the joint venture, with phase one of the farm-in agreement, in which Central is free carried, close to completion.

Central confirmed that Mt Kitty, located in permit 125, f lowed at 500,000 cubic feet a day during testing in April, intersecting 109 metres of Heavitree Formation.

The results propelled the company’s share price up by more than 10 per cent to over 50 cents.

But the momentum was short-lived when Central revealed a rig incident caused a temporary suspension of the site, preventing Santos from being able to undertake testing and logging.

Nonetheless, analysis from f low tests conducted at Mt Kitty 1 confirmed the presence of a working petroleum system, with Mr Cottee describing the presence of 9% helium as “very encouraging” given there is currently a global shortage of helium. Helium is also about 30 times more valuable than methane.

While Mr Cottee said the preliminary results prove the presence of a hydrocarbon charge in the Amadeus basin, he said the ambiguity of the announcement meant they couldn’t give the market what they expected.

“They (investors)] didn’t get affirmation or otherwise,” he said.

“Uncertainty is absolutely the death knell to everything.”

However, he reiterated that it wasn’t a negative result.

“We’re really quite chuffed with the results from Mt Kitty,” he said.

“Clearly the fact we did f low 500,000 cubic feet a day means that the 1,500 kilometres of seismic has been appropriately spent.”

Mr Cottee expects final results from the drilling campaign at Mt Kitty 1 to be to be released at the end of June.

While Santos doesn’t have to commit to phase two of the farm-in until August, Mr Cottee told Oil & Gas Australia that Santos was happy with the results to date and were already discussing details of the program for phase two

Mr Cottee is optimistic about Mt Kitty’s potential, suggesting it could underpin a connection between the NT to the eastern states, in particular New South Wales where predictions of an upcoming gas supply shortage are grim.

While the extent of Mt Kitty’s full economic potential is still to be defined, Mr Cottee said somewhere between 5,000 petajoules to 10,000 would be enough to carry the distance.

“Once you got that, then it will occur,” he said.

While Mr Cottee doesn’t doubt Central’s ability to achieve a gas supply connection, he conceded he wasn’t sure if supply from Mt Kitty on its own would be enough.

Turing to the newly producing Surprise West-1 oilfield, Mr Cottee said production had stabilised at around 250 barrels of oil per day after initial f low rates exceeded expectations, producing around 675 barrels of oil in 24 hours.

Central is currently pursuing opportunities for direct oil sales from Surprise in the NT, with plans to update the market in due course.

The company is also in the throes of the development stages at its new A$20 million Dingo gas field project, with a recent ceremony held in Alice Springs to celebrate the turning of the first sod of the development.

When production from the project begins in early 2015, Central will supply gas to Power and Water Corporation via a 45 kilometre pipeline.

Detailed design and engineering work for the pipeline is 50% completed, with a pipeline licence, which will pave the way for construction, expected shortly.

Total development costs for the pipeline and project combined are tipped to set Central back $22 million, but the cost is covered thanks to a recently secured $30 million debt financing package.

Central is eyeing off another short-term opportunity in the NT, this time in the South Georgina basin where its farm-out partner, France’s Total, is targeting unconventional gas potential.

Total has the option to attain ownership and a 68% working interest in the application area once total expenditure of US$196 million is reached.

While Central hoped drilling in the basin would start soon, Mr Cottee said land access issues were preventing any activities from occurring. He is hopeful of a timely resolution.

Mr Cottee kept mum on the possibility of proceeding with hydraulic fracturing in the Amadeus basin, but said that fracking wasn’t a new phenomenon in the territory, with both the Dingo and Palm Valley fields having been fracked in the 1980s.

“I think we have to win everyone over to that concept,” he said.

Mr Cottee, who says he is committed to improving social and economic development in the NT, said the mineral exploration boom presented a big opportunity for Central.

At present, there is just one spine from Alice Springs to Darwin where natural gas and electricity is transported.

But Mr Cottee said economic deposits would remain unviable without nearby infrastructure, creating enormous demand for distributed generation.

“In the short term we are hoping to use Surprise crude as a source to feed into those distributed generation plants for remote communities and mineral areas,” he said.

“Eventually we will be working with micro LNG and CNG which may well prove to be a useful substitute to importing diesel.”

Feeding off his experience in utilising micro LNG for transport purposes during his tenure at QGC, Mr Cottee said he was confident of bringing these ideas to fruition.

“Part of our strategy is to think of ways we can help to facilitate the economics of the mineral provinces as they come about by becoming a relatively close and local feed source without having to necessarily build infrastructure through pipelines,” he said.

“If my vision can prove correct over time, a classic win-win situation could come about.”