afr article today

NSW gas drill attracts majors

Angela Macdonald-Smith
The Australian Financial Review | Page 17 | 09 Aug 2010

Advent Energy's plans to test a possible big natural gas province off the coast of Sydney is attracting interest from larger oil and gas groups that want to join in the promising exploration.

The potential partners would join unlisted Advent and its partner Bounty Oil & Gas in drilling what will be the first gas exploration well offshore NSW. Drilling in the PEP11 permit, the state's only offshore petroleum exploration licence, is due to start in October at a cost of tens of millions of dollars.

Market interest in the well has surged since early July when Advent released an updated estimate of the targeted resource in the permit, doubling the volume of potential recoverable gas to 13.2 trillion cubic feet. A discovery on the doorstep of Australia's biggest energy market would drive a shift away from coal to gas for power generation, cutting carbon emissions.

Shares in MEC Resources, which owns 51 per cent of Advent, have jumped 48 per cent since the start of July, while Bounty Oil & Gas has gained 13 per cent.

"We have received approaches and we are evaluating them," said David Breeze, an executive director of both Advent and MEC Resources.

He declined to say what stake Advent, which now holds 85 per cent of the permit, may end up with in the exploration venture. Bounty owns the other 15 per cent. "We are evaluating what we might do relative to the sort of people who have approached us," Mr Breeze said. The PEP11 permit stretches about 200 kilometres from Wollongong south of Sydney up to Newcastle.

Market interest in Advent has been heightened by Talbot Group Holdings' 10 per cent stake. Talbot was the private investment vehicle of mining magnate Ken Talbot, who was killed in a plane crash in Congo in June. Talbot's other investments include explorer Karoon Gas, whose shares surged last year following discoveries off north-west Australia that may underpin a liquefied natural gas project.

Advent can also lay claim to some important Chinese connections, through chairman Goh Hock, a former Asia president of oilfield services major Schlumberger, and senior advisory panel member Ding Guiming, a former head of exploration at China National Petroleum Corp.

The expected start of drilling around the Great White and Marlin prospects about 55 kilometres east of Newcastle was recently delayed until early in the fourth quarter after a deferral in the date the drill rig would become available. The Ocean Patriot rig is now working for ExxonMobil at the $1 billion Kipper gas development in Bass Strait. The final drilling location in PEP11 has yet to be determined.

Independent experts used by Advent rate the chance of a discovery at the well at about 20 per cent, although other technical indicators point to a much higher probability, towards 80 per cent.

If successful, a gas discovery would have "immense significance" in terms of meeting the government's goals for carbon dioxide emissions reductions, Mr Breeze said.

Easy access to cheap coal resources in the Hunter Valley and technical difficulties in processing seismic data from the offshore Sydney Basin have deterred any drilling previously in waters off the NSW coast.