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Australia's AWE Identifies Country's First Commercial Shale Gas Play

After two years of study, Australian oil and gas exploration and production company AWE Ltd. said it has identified targets within the Perth Basin Shale play that rival the characteristics of some of the productive natural gas shales within the United States, with one interval -- the Carynginia Shale -- alone holding a gross of 13-20 Tcf in place within AWE's acreage.

The company added that commercial viability is "substantially assisted" by the proximity to existing infrastructure and the strong prevailing demand for, and pricing of, gas in the western Australia domestic markets. AWE said the strong commercial drivers apparent in the Perth Basin could make this Australia's first commercial venture in the "growing global phenomenon" of unconventional shale gas production.

The study focused on three sequences within the Perth Shale: the Carynginia Shale, the Kockatea Shale and the Irwin River Coal Measures. "The assessment has now identified a very large potential gas resource in one of three key shale sequences in AWE's acreage holding in close proximity to one of Australia's key domestic gas markets," the company said.

Following the analysis of the Woodada Deep-1 core results, AWE estimates that the middle interval of the Carynginia Shale alone holds 13-20 Tcf. AWE holds a position in approximately 1 million gross acres of prospective shale gas acreage in the Perth Basin (620,000 net acres), with high levels of equity in the majority of the permits and licenses. The company also operates the majority of this prospective acreage and will manage the pace of future activity across the prospective play.

"Further work will be required to ascertain the commercial viability of these shales within the Perth Basin," AWE said. "However, AWE is encouraged by the progress to date and plans to aggressively pursue further investigations on these opportunities."

Borrowing from the U.S. shale industry estimates that more than 20% of the gross gas in place within a shale play is recoverable, AWE said the recoverable reserve potential of the Carynginia Shale could be more than 4 Tcf of gas.

This gas potential of the middle interval is further supported by a drill stem test in the Arrowsmith-1 well located 25 km from Woodada Deep-1 in the EP 413 permit. AWE said this test was estimated to produce gas at rates as high as 4 MMcf/d without fracture stimulation, before subsequently declining. After studying the results of the Woodada Deep-1 core data, "the Carynginia Shales of the Perth Basin demonstrate a reasonable correlation with successful commercially developed USA shales, based on a number of key parameters, particularly depth, target thickness and mechanical (ability to fracture) properties," the company said.

AWE is currently working with the operator of the EP 413 (AWE 44.14%) permit to design a well to test the potential of the shales of the Arrowsmith area. It is planned to drill this well during the 2Q2011. The company is also undertaking planning for a test fracture stimulation of the middle Carynginia Shale, which was cored in the Woodada Deep-1 well. This stimulation work is planned for 2011.

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