This article is about 4 months old but not sure if anyone has read it.
So here it is, it's about BRU being the next WPL and an example of what having patience could produce for all concerned.
Buru Energy: Cracking The Canning
BY RICHARD CAMPBELL - 20/01/2014 | VIEW MORE ARTICLES BY RICHARD CAMPBELL
Get More Commentary, Dicussion & Market Information On - • BRU - BURU ENERGY LIMITED
The Canning Basin has been much studied, but not much explored.
By using analogies with similar sedimentary basins across the world the US Geological Survey estimates that it contains 230 TCF. This is 35 times the gas produced by the Gippsland Basin over the last 40 years or about half the gas resources of all the fields of the North West Shelf, the Browse and the Bonaparte combined. As Buru Energy holds the dominant position in the Canning and has a forward supply contract with Alcoa as well as legislative backing from the WA government, it should be in a strong position to drive a significant lift in value beyond the current $530m.
Exactly how far beyond is of course the key question. If there were absolutely no doubt that the gas and oil it shares 50/50 with Mitsubishi is recoverable on the scale that its independent expert report predicts, Buru’s price would already be closer to $10 than the current $2.00, but as well as scale and recovery, there is the no small matter of logistics and the securing of long term contracts. After peak of $2.50 in 2012 as volume estimates arrived doubts emerged about the logistics and the local opposition to fracking. The price dipped twice to $1.40 over 2013, but now confidence is returning. Buru has proved that some parts of the giant Canning Basin – two thirds the size of Texas – is not only gas rich, but has one or more handy oil windows as well.
This renewed interest follows months of multi-rate production tests on Ungani-1 and 2, a pair of conventional wells flowing at over 1000 bpd on chokes. Both wells were re-worked and volume is now enough to start sending shipments – ie truck and ship – from a temporary facility at Wyndham. Output is planned to rise to 4000 bpd by the end of the year and then gradually lift to a target 15,000 bpd as more wells of the Ungani trend come on line. This oil fairway is 120 kms by 40 kms wide with up to a hundred targets identified from 2D and 3D seismic. The source is a dolomite limestone similar to the limestone and dolomite reefs at Blina almost 300kms to the east where a Canadian company recovered over 1.5 million barrels of sweet oil from two wells in the early eighties. Both levels had excellent permeability, but the moderate volume and low price at the time didn’t justify trucking oil from an area which gives full meaning to the term “the middle of nowhere”.
Buru now controls the Blina field at a time when the oil price is much higher, but it has also picked up more acreage down-trend from Ungani to give it a strong position near Broome which will become the transhipment point as volumes rise.
Conventional oil is only an appetiser as work is about to begin on a second phase of drilling for deeper gas in the Laurel formation, a sedimentary layer which spreads more or less continuously across the greater part of the Basin for depths of up to 3 kilometres. Independent experts believe Buru’s half share of the Laurel formation dry gas is likely to be 47 TCF with “liquids” at over one billion barrels. Other deeper formations also giving indications of dry and wet gas could extend these numbers by 10-30%.
To give this 47 TCF some proportion the greater Gorgon is estimated at 40 TCF and the still to be discovered gas in the Gippsland Basin is reckoned at 6-10TCF and so for 3-5 TCF for BHP.
It should be said at once that this is not an apples for apples comparison. Gippsland’s gas fields are largely free-flowing and shallower than the compacted deeper sands, mudstones and shales of the Canning. While the Canning’s gas bearing intersections may be 10-15 times thicker, this is largely “tight gas” requiring fracturing with highly pressurised water, sand and solvents. Gippsland also had the advantage of relatively shallow off-shore depths (although deep for the time), proximity to the one of the country’s largest population clusters and large oil pools to propel the economics of development.
But Buru can counter with a few strong cards of its own: first the agreement to supply Perth industry and households following the failure of the Perth Basin’s geology to give up the volumes of gas in place and second, part of the infrastructure to deliver gas south already exists in the form of the Dampier-Perth and Dampier-Goldfields pipelines. The scale of the potential volumes also raises the possibility of an on-shore LNG facility. While James Price Point was not economic for Woodside’s Browse partners, it is a different matter to lay pipes on land. Point Torment north of Derby could be the place as it is already gazetted for industrial development. This low muddy peninsula juts out into King Sound and forms the last visual surface evidence of the ridge that divided two sections of a vast embayment which once spread 250-300kms inland between the more stable Kimberly and the Pilbara cratons. As this trough’s deep floor rose and fell it gradually filled with coral reefs, mud and the sediments of eons of wind, rain and periods of glaciation.
Buru supporters have also noted that Apache Energy which is experienced in “unconventional” oil and gas recovery has arrived on the scene. The partners have traded 50% of several coastal and southern tenements on favourable 80% cost carried terms. These funds will largely target deep, gas prone sand formations, but also conventional oil.
Experience of a major is welcome, but the technical hurdles can often be easier than the social ones. Concerns by the native total association that fracking operations could permanently pollute surface water are understandable even if the operations will be 2-3 kms below their ground water. Buru is acutely aware of the political and reputational risk and has made it clear that it will not begin fracking unless it has local support. The fact that its native liaison officer has recently become the Chairman of the Yawuru land rights association tends to put this risk in context.
While it is clearly too early to think of Buru as a Woodside in the making, that prospect is not sheer fantasy. The Ungani oil field may be small by world terms but its cash will help build momentum for what could be “company making” prizes to come.
BRU Price at posting:
$1.15 Sentiment: LT Buy Disclosure: Held
