Statoil in Oz shale fail

Shale fail: Statoil joint venture misses in Australia

Norwegian giant Statoil has abandoned a shale well in Australia's Southern Georgina basin in the Northern Territories after it failed to flow oil or gas.

Joint venture partner PetroFrontier of Canada said operator Statoil had perforated the OzBeta-1 well over a three-metre interval within the Arthur Creek shale at a depth of about 1350 meters. The well was drilled to a vertical depth of 1442 metres, with no apparent horizontal leg.

Statoil completed "a small water-based hydraulic stimulation" comprising 137 cubic metres of water and 14.1 tonnes of sand, followed by a coiled tubing-conveyed jet pump test.

A total of 157 cubic metres of water flowed back "with no measurable volume of hydrocarbons", PetroFrontier said in a statement on Tuesday.

"No oil or gas was produced and Statoil has informed PetroFrontier that the OzBeta-1 well will now be abandoned," the statement said.

"These results are disappointing and technically challenging considering the positive hydrocarbon indicators measured while drilling and subsequently derived from log data."

Up next is a completion and testing operation at the OzDelta-1 well, which "is now considered to be the technically preferred location over the OzAlpha-1 location as previously announced".

The bad result at OzBeta-1 could dissuade Statoil from exercising its option to take an 80% interest in PetroFrontier's permits.

Under the terms of the farm-in agreement, Statoil was to fully fund exploration activities over three phases through the end of 2016 in exchange for an 80% stake in the project.

That amounts to about $65 million spent on seismic and drilling on up to five wells through the end of this year. PetroFrontier spent $15 million in the early stages of the partnership.

At the end of this year, Statoil will have the option to continue to the next phase or return to PetroFrontier 50% of its former working interest in the permits, giving the Norwegian company a 30% stake and leaving PetroFrontier with 70%.

Statoil will base its decision on the results of three wells it plans to complete by year's end. It is not clear how PetroFrontier would proceed if it was saddled with the bulk of the drilling and completion costs in a wildcat unconventional play. A company spokesman was not immediately available for comment on Tuesday.

With OzBeta-1 a bust, and previous probe OzEpsilon-1 showing a lack of hydrocarbon indicators, a lot hinges on OzDelta-1.

That well was drilled to a total vertical depth of 840 metres and hit a 98 net metres of the Lower Arthur Creek and Thorntonia formations. Statoil will use the same completion strategy on OzDelta-1.

Results are expected early in the fourth quarter of 2014.

PetroFrontier's stock plummeted almost 18% on the latest news.

It closed Tuesday in Toronto at 14 Canadian cents.

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