As company managing director David Rowbottam told Oil & Gas Australia, it is all about being in the right place at the right time.
“We’ve got current gas contracts maturing and coming to an end at one price level, and a new price is being set probably at something like 75 per cent to 80% over what they were last time,” he said.
With gas prices on Australia’s east coast expected to rise due in part to Queensland’s LNG export market coming on stream later this year, Mr Rowbottam said circumstances had increased La Bella’s commercial viability.
“We did predict the push on commodity price. We’re glad that that’s come about because it’s really changed the economics,” he said.
WHL is focused on near-term development at La Bella, with the company’s ambitions being boosted by the recent constraints placed on Victoria’s onshore drilling industry.
“When we as a management team decided to go down the path of La Bella, we didn’t expect onshore drilling bans,” Mr Rowbottam said.
Last year, Victorian Premier Denis Napthine maintained a ban on hydraulic fracturing until mid-2015 despite a report from the Gas Market Taskforce warning that rising gas prices and depleting gas resources in the Bass Strait could lead to volatility in the State’s gas market.
The report recommended Victoria promote the production of additional gas supply, but with the State’s onshore gas industry in a holding pattern for the time being, industry opportunities are mounting to fill a projected supply gap, with WHL in the front seat to take advantage of Victoria’s rapidly changing market conditions.
WHL, as the operator, holds a 40 per cent equity interest in exploration permit Vic/P67 which contains the undeveloped La Bella gas field and several nearby exploration prospects.
WHL beat a handful of other companies in a government acreage release round in April 2012 to secure the rights to the field, and in 2013, entered into a farm-out agreement with AWE.
AWE funded 75% of the cost of the recently completed La Bella 3D seismic survey which covered more than 92,500 hectares.
Following review of the seismic data, AWE has the right to surrender its interest in the permit or to commit to drilling two exploration wells at either 30% or 60% working interest. If AWE elects to enter the drilling phase it will also assume operatorship of Vic/P67.
In addition, Tap Oil has an option to acquire an initial 10% interest in Vic/P67, but isn’t required to exercise its option until ten days after AWE confirms whether it wishes to elect to enter the drilling phase. The final seismic volume is currently being assessed by AWE.
While Mr Rowbottam could not provide details on the 3D survey due to confidentially agreements, he noted that the initial results were encouraging. So encouraging in fact that the JV decided to contract Aztech Drilling to undertake the next phase of the well planning.
New information has helped WHL define a current portfolio of 11 prospects in Vic/P67, containing total best estimate prospective resources of 610 billion cubic feet of gas and 14.1 million barrels of condensate and LPG.
While there are a few other companies planning to drill for gas offshore Victoria, Mr Rowbottam said it had an advantage that would reduce La Bella’s development risk profile.
“The big benefit we have with La Bella is BHP proved it was an existing gas field 20 something years ago,” he said.
“This issue is just going to be around economics and having a development strategy that works financially.”
When it comes down to determining what makes a project commercial, Mr Rowbottam believes infrastructure can almost be as important as the size of the resource.
La Bella has the advantage of being in close proximity to established infrastructure, including the Santos operated Casino development and BHP’s Minerva development.
“We’re not going to have to develop our own production platform at sea, we are going to be able to instead link in to existing infrastructure,” Mr Rowbottam said.
With no further new production around in the short-term and with the view that the nearby developments aren’t running at full capacity, Mr Rowbottam said it would make sense for the operators to bring La Bella in to the mix.
“Given the high commodity prices, it’s logical to assume that existing infrastructure holders would be seeking to maximise production,” he said.
The opportunity to leverage off existing offshore infrastructure leads Mr Rowbottam to predict La Bella could be generating revenue between three and five years.
“We think there’s a commercial project there that’s viable and if AWE can also see the same sort of structures that we can see I think it will fulfil their needs in terms of being of a sufficient size to justify full development,” Mr Rowbottam said.
Once AWE confirms its position in the JV, expected sometime in October, long lead drill items will follow along with the next set of studies to determine the drilling target.
“We’ve got quite a few options available to us so it will be interesting to see how we manage the opportunities that are presented to us,” Mr Rowbtottam said.