The Stage 1A Xyris Production Facility was refurbished with the help of local Mid West contractors. Image: WGP Group, Photography Karl Schwerdtfeger.
By Elizabeth Fabri
JUST four hours north of Perth in WA’s mid-west sits the Waitsia field; an onshore gas reservoir filled with reserves that could service the WA gas market for well over three decades. Now, two and a half years since its discovery, the project has already begun selling gas from Stage 1A, and is advancing construction plans for its 100 TJ/d Stage 2 facility.
Considered Australia’s largest onshore conventional gas discovery in more than 30 years, the Waitsia gas field, jointly owned by AWE and Origin Energy, has been a welcome addition to the industry since its unexpected find in September 2014.
Not only does the project supply gas on a domestic scale, the field is conveniently positioned on pastoral land near existing pipeline infrastructure and facilities, allowing it to enter production much faster than its counterparts.
“The onshore Perth Basin position we’ve got has an awful lot of geographical advantages; its the most proximate gas supply to the South West of WA,” AWE managing director and chief executive David Biggs said.
“Its onshore on very easy farmland close to all sorts of facilities like roads, power supply and population; and is right next to the two major pipelines that service Perth and further South so the key thing is its very well situated from a geographic and competitive point of view.”
Current forecasts estimate combined gross proved and probable reserve and contingent resources of the Waitsia, Senecio, Iwin and Synaphea fields to be 721 billion cubic feet, which would meet about 10 per cent of WA’s domestic gas demand once fully developed.
“We see our onshore position as the best place position in that basin; we dominate it,” Mr Biggs said.
“Our view is that we’re looking at a 35 year gas resource potentially, and we plan to start looking further afield through our permits for other gas reservoirs that we can produce from in the future.”
In August 2016, a month shy of its two year discovery mark, AWE achieved first gas from Stage 1A of the project, on time and within budget.
The project involved connecting the Waitsia-1 and Senecio-3 gas wells to a refurbished Xyris Production Facility, which would then deliver gas to the Parmelia pipeline for domestic consumption.
“We actually owned the land; we bought the farm in which this Xyris facility sits and also the wells set on farmland we owned so we had a relatively straight forward permitting process,” Mr Biggs said.
“We have got two wells that we are producing from and putting through the Waitsia Stage1A facility.”
Mr Biggs said the Senecio-3 and Waitsia-1 wells were already exceeding production and productivity expectations.
Gross production from the first month came in at 309 TJ of gas and 53 barrels of condensate and in the December quarter, Onshore Perth Basin gross production was 770 TJ of gas and 172 barrels of condensate, at an average daily rate of 8.4 TJ/d.
The fourth quarter also confirmed high-quality connectivity from Kingia Sandstone from Senecio-3, and High Cliff Sandstone produced from Waitsia-1.
Mr Biggs said operating life at the facility was essentially as long as the joint venture partners wanted to make it, pending on future gas contracts secured with buyers.
“We currently have a two and half year gas contract with Alinta and we’ll keep that facility operating for much longer than that. We have the ability to look at debottlenecking the facility, which essentially means expanding it slightly,” he said.
“The thinking at the moment is that we will continue to run this facility in parallel with the new Stage 2 plant.”
Stage 2 progress
Once constructed, Waitsia’s Stage 2 facility will deliver at least 100 TJ/d for up to 10 years, according to an independent review of the Waitsia proved and probable gas reserves.
The September 2016 review showed a 34 per increase in Waitsia’s previous reserve estimate, which was the positive news AWE had been waiting to hear to progress the project.
During the quarter, AWE and Origin Energy agreed to proceed with the 100 TJ/d Stage 2 full field development with no intermediate stage, an approach it claimed would “deliver considerably higher economic value than a phased development”.
This was primarily due to lower overall construction costs and alignment with anticipated higher gas prices and stronger customer demand in CY 2020 and beyond.
In the December quarter, Pre-Front End Engineering and Design (FEED) work began with final Stage 2 appraisal wells planned to be drilled in the first half of 2017.
“Pre-FEED we’ll complete in the next month, and then there’s a ‘decision gate’ which the joint venture will need to go through to move it to FEED. We expect that decision to take place sometime in the June quarter,” Mr Biggs said.
“FEED is where all the detailed engineering work is done and that will lead to a final investment decision; at this stage we’re aiming for December of 2017.”
If AWE sticks to its plan, first gas from Waitsia Stage 2 would be achieved between 2020 and 2021.
“Once we start production from Stage 2 we will also start to think about expanding that production possibly up to 150 terrajoules a day,” he said.
“To do that we will need to develop more of the gas resource, and to do that we need to drill some more wells.
“We’ll be actively exploring for further gas deposits in the permits we have, and we’ll also be looking for customers that will enable us to expand our production beyond the 100 terajoules a day.”
In addition to securing a gas contract with Alinta for Stage 1A for 9.6 TJ/d for two and a half years, the joint venture was in discussions with AGL Wholesale Gas for future gas sales from Stage 2.
On 27 February, AWE and Origin agreed to a nonbinding term with AGL which set out commercial terms for the sale of 15 TJ/d gas or 5.5 PJ per year from Stage 2 of the project, equating to 15 per cent of nominal daily production capacity.
“We signed a term sheet which is a precursor to a gas contract, and the first of probably two or three more term sheets which we plan to sign over the next month or two,” Mr Biggs said.
“The importance of these is that unless we can sell the gas for a proper price and be sure that it will be lifted over the contract term, it is very difficult to make a positive investment decision.
“These gas contracts are crucial to the economics of the investment decision for the facility, as they will effectively provide the cashflow that underwrites the return on the investment.”
AWE said it aimed to finalise the gas sales agreement with AGL by mid year.
“The agreement with AGL reflects the growing demand for onshore gas and highlights the benefits that a new supplier can bring to the market in terms of diversity, lower risk and certainty of supply,” Mr Biggs said.