Coal Seam Methane Exploration in the Pilliga
In November the titleholders of the licence covering much of the Pilliga (PEL 238) agreed to sell all the coal seam gas rights and 51% of any other hydrocarbons to First Source Energy. A year later this group farmed out these rights to Forcenergy.
In July 1998, NSW Premier Bob Carr met a delegation of oil company executives in Washington. Three months later a press release from the Mines Department was headlined, "Biggest Single Gas Find In NSW," but the text was far more honest, saying, in part, "if any gas resources are discovered."
Further publicity was given to a similarly up-beat press release in February 1999, this time by the then Minister for Mineral Resources, Bob Martin,
"NARRABRI-SYDNEY/NEWCASTLE PIPELINE TURNS UP HEAT IN SEARCH FOR GAS".
The text revealed that he was actually referring to a preliminary, conceptual study of the feasibility of the project. The exploration itself had found "Strong flows of gas from the nine wells already drilled near Narrabri. And Forcenergy ..plan to drill a further 11 wells by the end of April, .to test the fields commercial viability with the possibility of drilling 60 wells in one year.
One month later, in March, ForceEnergy filed for bankruptcy in the USA; staff lay-offs and major cost cutting began.
March The NSW Department of Mineral Resources released a report on the petroleum possibilities of the Pilliga area called, "Assessment of the Hydrocarbon Potential of the Southern Brigalow Bio-Region Pilliga NSW" prepared by Upstream Petroleum Consultancy Services. Extracts from this are given below:
Two Coal Seam Methane pilot plants are operating at Wilga Park and at Bohena. There are also conventional hydrocarbon targets at Wilga Park, Bohena and Coonarah as well as at 15 other sites. The main target area covers much of east and west Pilliga State Forests and the Pilliga Nature Reserve. However, the report assumed that readers would know the difference between resources and the real world:- "caution should be exercised as it is not possible to quantify the percentage of resources that may be ultimately recoverable PEL 238 could/might contain some 35 TCF of resources. There are some 15 conventional (not CSM) hydrocarbon (gas) targets in PEL 238 each with a target size (unproven) of 10-20 BCF (109 cubic feet). The region can, apparently, be compared to the Cooper Basin in terms of hydrocarbon reserves/potential. One TCF would supply the Newcastle-Sydney-Wollongong market for about 10 years at the current level of consumption.
April "Exploration near Narrabri has identified a coal seam methane resource of over 35 TCF in place" was the sub-heading of a feature article in the glossy departmental magazine MINFO. This four-page article provides more details on the exploration results than the 60 page report handed over to the Brigalow South review group. It also acknowledged that the bankruptcy of the company supplying the money and operating the programme "delayed the project". This article reported that up to February 1999 some 15 boreholes and 486km of seismic survey lines had been completed.
Testing of the lower of the two coal units had "indicated gas reserves of 5 billion cubic feet to 12 billion cubic feet per well". (It was not explained that there is no code of conduct in Australia for reporting crude oil or natural gas discoveries. The universally accepted code only covers metallic minerals and coal.) At Bohena there is a thick basal coal seam up to 12.2m thick at about 900m below the surface. Three wells (or boreholes) were reported to be already producing gas and four more were at the initial testing stage. At Wilga Park to the north, four wells were being tested to check on the rate and consistency of gas flow. Computerised forecasts put the forecast reserves at Bohena at five to twelve billion cubic feet per well. The article concluded by noting that more drilling would be done at Bohena, and exploration would also focus on 15 anticlinal structures within PEL 238 that had been identified by seismic work. " Proximity to existing [gas] pipelines will allow for connection of Narrabri gas to the entire eastern Australian gas market."
5. 2000 USA
In February 2000, Forcenergy declared itself free from bankruptcy through a US$300 million bank bail-out, however the bankers as it turned out were at the same time searching for a company willing to make an offer for the company.
In May 2000, the following report was released in the USA:
"Forcenergy Australia Pty, Ltd. is currently drilling the second of four planned wells at its PEL 238 coalbed methane project in New South Wales. The first of these four wells has confirmed the presence of thick gas-bearing Maules Creek coals approximately 12 kilometres south-east of the Bohena pilot area. Further year 2000 activity will be decided based on results of the new drilling and continuing well work in the Bohena pilot area."
Significantly there has been no formal announcement of any Reserves or Resources from either Sourcenergy or from any other oil company. The announcements have been made by the DMR in New South Wales.
On 11 July, a Denver-based company, Forest Oil Corporation, announced that it would buy a controlling share (56%) of Forcenergy for around US$542 million. Forest Oil Corporations largest shareholder is a Colorado oil magnate, Philip Auschutz, who has a 30% interest. The deal doubles the size of Forest Oil and places it among the top ten independent oil and gas producers in the US. The new arrangements was expected to operate from 7 December 2000. On 16 November the new Forest Oil announced a major gas discovery off the west coast of South Africa. The discovery well flowed at a rate of 30 million cubic feet of gas a day, and preliminary reserves are put at three trillion cubic feet of natural gas. Forest Oil Corp. has traditionally operated in North America, with only US$7 million being spent outside North America in 1999 out of a total revenue of US$322 million. Forest Oil Corporation has previously shown no interest in the specialised field of coal seam gas exploration.
5. On Site Status in the Pilliga September 2000
A visit to the Pilliga East State Forest and surrounding areas in September 2000 revealed that several of the locations appeared to have been abandoned and all machinery and equipment removed. Final remedial rehabilitation of the sites had clearly not yet been carried out.
There was little sign of any intensive activity at Coonarah, Wilga Park or Bibblewindi, all areas that have been described by the DMR as sites where gas production was in progress or imminent. The only sign of any activity was at a handful of drillsites at Bohena, where routine testing was in progress at some of the locations. There seemed to be no sign of any new areas being drilled or of any detailed pre-drilling surveys.
If this impression is correct, it suggests that many of the statements made since 1998 have been over-optimistic and even misleading. Far from a natural gas industry and a natural gas pipeline being constructed in the near future, the operating oil company has made no formal announcements of any gas reserves, and the last comment, in March 2000, was the status of any future exploration depended on the results of the four wells planned.
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