ARC Energy Expands into Canning Basin

ARC Energy Limited has secured a significant regional exploration holding in the onshore Canning Basin in Australia's northwest.

The acquisition is the result of a detailed review of the exploration potential of the area, several months of negotiation with the existing permit holders, and applications for areas with specific geological attractiveness. The Canning Basin is one of the last under-explored areas in onshore Australia and has geological similarities with highly productive regions in Oman and the United States.

The acquisition includes:

  • the purchase of a number of permits from European Gas Limited;
  • a letter of intent in regard to the petroleum rights to areas under application by Rey Resources; and
  • the lodgment of applications for two Special Prospecting Authorities with the Western Australian government.

Subject to the usual operational and approval constraints, an initial drilling program is scheduled for the "dry" season in mid to late 2007. This program will focus on areas with existing oil and gas discoveries where large inplace resources of oil and gas and numerous exploration targets have already been defined.

Commenting on the acquisitions, ARC Managing Director, Eric Streitberg, said:
"ARC's exploration portfolio is very considerably enhanced by this move into the Canning Basin. It is one of the last under-explored onshore basins in Australia and will add considerable depth to our already strong exploration portfolio in the Perth Basin and Yemen. The dynamics of exploration in the Canning Basin have been transformed by the new reality of sustained high oil prices and the encouragement for development of domestic gas resources in Western Australia."

"The Canning Basin exploration areas are ideally suited to ARC's disciplined approach and successful business model of high equities; permit operatorship; aggressive, technically driven exploration; and fast track development of our oil and gas reserves. ARC brings to the Canning Basin a level of funding, commitment, and onshore exploration and development expertise that has not been applied to the area since the initial discovery of oil in the 1980s. ARC has also worked effectively with the traditional owners of our exploration areas in the Perth Basin and we look forward to establishing similarly constructive relationships in the Canning Basin."

"The Canning Basin has proven to have significant exploration challenges in the past, but given my experience in the Perth Basin, which in the early 1990s was wrongly perceived as gas prone and with low prospectivity, but is now a major oil producing province, I am extremely excited at the prospect of exploring this region as it has seen such a low level of systematic exploration. Our evaluation of the Canning Basin suggests that it has all the hallmarks of a major petroleum province."

The onshore Canning Basin covers an area of about 530,000 sq km in central northern Western Australia.

Two population centres, Broome and Derby, have shipping and air facilities, and Broome also serves as the shipping terminal for refined petroleum from the region. Minor oil pipeline grids service the Blina fields and the Telfer gas pipeline runs along the southern margin of the Basin.

The Basin contains two major northwesterly trending depocentres separated by a mid-basin arch. The depocentre in the northern part is separated into the Fitzroy Trough and the Gregory Sub-basin, which are estimated to contain up to 15 km of predominantly Devonian aged and younger rocks. The southern depocentre includes the Kidson and Willara sub-basins and thinner sedimentary sequences (4km to 5 km in thickness) of predominantly Ordovician to Silurian age.

World renowned Devonian reefs are exposed on the Lennard Shelf in the northeast of the Canning Basin. The exposed reefs give an excellent insight into the subsurface carbonate geology. The Blina Oilfield produces from the sub-surface equivalents of these reefs.

Petroleum exploration activity began in the Canning Basin in the early 1920s and nearly 250 wells have since been drilled onshore and 13 offshore. There has also been the acquisition of approximately 78,000 km of seismic data onshore.

Up until the mid-1980s, exploration largely focused on the northern and central basin areas. The primary exploration targets were the Devonian and Permo–Carboniferous sequences, where discoveries were made in the Devonian reef section and the overlying Permo-Carboniferous clastics, principally in the Blina area. However, the relatively small size of these pools and the low oil price in the late 1980s meant that exploration languished.

Although many of the regional exploration wells had shows, especially of oil, the Basin remains substantially underexplored with few valid structural tests. More recently, the sub-salt Ordovician section has been an exploration target, with Shell intersecting a significant oil column in tight reservoirs at its Looma 1 discovery in the southern Canning Basin.