Exxon Mobil buys huge Bass Strait gasfield

Oil giant ExxonMobil has secured what could be one the biggest gas finds in Bass Strait — a potentially 2 trillion cubic feet field on the edge of the continental shelf called Dory.
If it is everything Exxon hopes, it could significantly extend Exxon and BHP’s big Victorian operations and help ease longer-term east coast gas supply concerns.
Exxon has acquired the field from privately held US explorer Liberty Petroleum and accelerated drilling plans as east coast gas prices surge and mounting concerns about domestic shortages spur federal government export restrictions.
It is understood Exxon has contracted a rig to drill in the deep water off the continental shelf in the third quarter of next year, bringing forward drill commitments by a year.
Dory is still an exploration play and needs to be proven up. But work done by Liberty over the past two years has shown what was previously thought a small field could be a giant and sparked excitement at the oil supermajor. The first public allusion to the deal was in Exxon’s US earnings report last month, where it said it had captured a “high-quality exploration block” in Australia.
It is understood the acreage referred to was exploration permit VIC/P70, which contains Dory. Government registers show that Exxon agreed to acquire it for an undisclosed price on May 19.
“We recently completed a transaction with Liberty Petroleum to acquire its interest and operatorship of the VIC/P70 exploration permit in the offshore Gippsland Basin in Australia,” an Exxon spokesman confirmed.
“We are currently progressing our exploration plans for the ­licence.”
The deal comes as activity in Bass Strait heats up on the back of east coast gas price jumps in response to Gladstone’s LNG export industry rapidly tripling east coast demand.
In its quarterly report last week, Origin Energy said it was studying a new appraisal and development plan in the Otway Basin off Victoria for its Geo­graphe and Thylacine fields.
Melbourne junior 3D Oil, in its quarterly report, said it was talking to a number of international oil companies on farming in to the yet-to-be-drilled Flanagan prospect. A Worley Parsons development analysis showed a “small” discovery of 500 billion cubic feet at Flanagan would have a net present value of $350m, while a 1 trillion cubic feet discovery would be worth $1bn.
Exxon ran its Bass Strait gasfields and Longford plant at record rates of 1000 terajoules a day last year and plans to do so again this year, after bringing on its Kipper-Tuna-Turrum project gasfields and an associated carbon dioxide-stripping plant to meet some of the growing east coast demand.
Neither Exxon nor Liberty would disclose the terms of the Dory deal, but the title transfer documents show the transaction includes some sort of royalty arrangement. While Exxon has made the acquisition itself, it is understood BHP has an option to take a stake as part of the pair’s Gippsland Basin joint venture that has operated the nation’s most prolific oilfields since the 1960s.
Dory’s potential is a surprising development because Exxon’s standard line of recent years has been that all the big fields in Bass Strait have been discovered. Any new developments were expected to be more costly to develop because of their size and because they contain impurities.
But if Dory contains the 2.2 trillion cubic feet of impurity-light gas that Liberty claims it could, Exxon’s assumptions will be turned on their head.
If so, Dory would contain more gas itself than the combined 1.6 trillion cubic feet of gas in the Kipper and Tuna fields that underpinned (along with oil reserves) the $5 billion Kipper-Tuna-Turrum development and could supply total east coast domestic demand for four years.
On top of that, Dory is in the “top Latrobe” formation of the Gippsland Basin, meaning it is expected to contain what the industry calls “sweet” gas.
This means it is unlikely to have high levels of carbon dioxide, which required a $US1bn onshore plant to open at the Longford gas facility this year to process KTTgas, or mercury, which delayed development of the Kipper field.
“Resources” (which are less certain to be in the ground than certified “reserves”) calculated by gasfield sellers always need to be taken with a grain of salt. But Dory’s mention in the Exxon quarterly and its accelerated drilling gives added weight to Liberty’s claim the field could be many times bigger than previously thought.
Dory was drilled by US company Apache Energy in 2008 and thought to be small. It was acquired in 2014 by Liberty, which in 2015 said it had potential resources of 44 billion cubic feet and was not the main target in the permit.
But by the end of last year, Liberty had deduced the true extent of the field appeared to have been hidden by the continental slope. Liberty drew parallels to Woodside Petroleum’s Pluto field off Western Australia, which had been hidden by the continental slope before its 4.4 trillion cubic feet of gas (which underpinned a $15bn LNG plant) was discovered.
Liberty says Dory appears to be connected to the Gippsland Basin venture’s Blackback field and a nearby prospect identified by Apache called Fangtooth.
The deal comes as Exxon and BHP await a decision from the federal and Victorian governments on a request for renewal of the retention licence on the South East Remora gasfield in Bass Strait, which is believed to hold 260 billion cubic feet of gas.
The resources giants want to delay developing the field for at least another five years, saying it is not yet viable because high levels of carbon dioxide in the gas mean it will need to wait until the new Longford plant processing KTT gas has spare capacity.