By Lauren Barrett
ORIGIN Energy has made a A$200 beeline into the Northern Territory’s Beetaloo basin to explore for shale as it looks to secure new energy sources.
Origin announced on 2 May that, together with South Africa’s Sasol, it had signed a conditional farm-in agreement with Falcon Oil & Gas subsidiary Falcon Oil & Gas Australia for three onshore exploration permits in the basin, about 500 kilometres south-east of Darwin.
The permits, highly prospective for shale gas and associated liquids, cover more than 1.85 million hectares of the Beetaloo basin.
Upon completion of the farm-in, which is subject to government and relevant stock exchange regulatory approvals, Origin and Sasol will each hold a 35 per cent stake in three permits and Falcon will hold a 30% interest, down from its original 70% stake.
Origin will assume operatorship of the permits and will pay Falcon about $11 million following the deal. Origin will then progressively contribute $32 million during three years to fund its share of exploration.
Origin Upstream chief executive Paul Zealand said the farm-in provided the company a significant unconventional exploration position in one of the state’s most “prospective onshore basins.”
“Previous exploration activities within the Beetaloo basin, including drilling activity on the permits, has highlighted its strong shale gas potential,” he said.
“The signing of this farm-in agreement is consistent with our objective to find new sources of energy.
“Upon success, these resources could then be monetised by connecting them with domestic and international markets,” Mr Zealand said.
Under the agreement, Origin and Sasol will hold an option to participate in two further work programs, earmarked for 2017 and 2018.
Origin has evaluated its contribution to stage two and three to be $25 million and $24 million respectively.
According to Falcon, Origin and Sasol will pay the full cost of two horizontally fracture stimulated wells, 90 day production tests and micro seismic with a capped expenditure of $53 million. The work program is expected to be undertaken in year four.
On the other side of the spectrum, the farminees can reduce or surrender the interests only after the drilling of the first five wells or the drilling and testing of the next two horizontally fracture stimulated wells. However, Falcon Australia said that drilling was being specifically targeted to take the project towards commerciality.
The deal is a big step forward for Falcon Australia in its bid to develop its unconventional acreage in the NT.
Origin’s interest in the permits also comes after the exit in July of Falcon’s former partner Hess Australia.
Its decision not to proceed with the drilling of five wells saw it forfeit its right to earn a 62.5% interest in three of the permits.
Falcon chief executive Philip O’Quigley said he was delighted to have on board two great fit-for-purpose partners.
“The farm-out announced today marks a significant milestone in the history of Falcon as it provides for a five year, nine well, technically comprehensive exploration work program in the Beetaloo,” he said.
“Origin brings with it an enormous wealth of expertise as an unconventional operator in Australia. Sasol, through its interest in the Montney unconventional shale play in North America brings with it enormous expertise of operating unconventional shale plays and is a world leader in gas to liquids.
Meanwhile, Falcon chairman John Craven said it now had the financial and technical fire-power to unlock the real hydrocarbon potential of the Beetaloo basin.
Falcon Australia’s parent company, Falcon, is listed on the Toronto Venture Exchange, the London Stock Exchange Alternative Investment Market and the Dublin Stock Exchange Enterprise Securities Market. In July, Falcon consolidated its interest in Falcon Australia and increased its shareholding from 73% to 98%.
It is expected that a drilling campaign will start as soon as possible following completion of the agreements and subject to rig availability.