ROC’s Cliff Head Oilfield Finally Gets The Investment Greenlight...

ROC’s Cliff Head Oilfield Finally Gets The Investment Greenlight And Puts Australian Juniors On The Oil Production Map
The Cliff Head oilfield in the offshore Perth Basin has got the greenlight for development, a decision that will put Sydney-based ROC Oil back on the production track come first quarter 2006.

ROC, which is listed on the Australian Stock Exchange and London’s Alternative Investment Market, was left with a gaping hole in its production profile - and a large pot of cash - after it sold Saltfleetby, Britain’s largest onshore gas field, to WINGAS for A$111 million (£44 million) at the back end of last year. This was a good price for an aging asset, with ROC making a post-tax profit of around A$72 million on the deal.

ROC’s production, however, is set to beef up from its current anorexic 50 barrels per day as a number of interesting projects move towards completion. First off the blocks will be a production stream form the Ardmore oilfield in the North Sea, which pumps some 8,000 bpd, a number that is expected to rise to 12,000 bpd by the end of this year. The Australian oil firm made its move on Ardmore at the end of 2004 when it agreed to act as a friendly banker to privately-owned Acorn Oil & Gas, which owns 35 per cent of Ardmore. In return, ROC received an option to take up to 26 per cent of the equity in the field - a decision on whether to exercise that option is likely to be taken in May.

ROC also holds stakes ranging between 2 and 5 per cent in the prolific production sharing contract areas off the coast of Mauritania in northwest Africa. The landmark Chinguetti oil development is already underway, with first production of 75,000 bpd due early in 2006.

The Cliff Head oilfield off Western Australia is different from the other projects in that ROC holds a large stake (37.5 per cent) and acts as operator. It’s taken a long time to get the development go-ahead - even as late as last month doubt was cast on the project’s commercial viability after a disappointing result from the Cliff Head-5 well. This well was thrown off course due to unexpected seismic velocity variations and the result has been a reserves downgrade, from 18-21 million barrels to just 14 million barrels of recoverable reserves. There are, however, hopes that further appraisal and seismic work on the field will unlock further reserves to the northwest, east and northeast of the field, which will all be accessible from the Cliff Head platform.

The price tag on the project - at A$227 million - seems high given the modest reserve base but it does involve costly deviated and horizontal drilling and the platform and associated hardware has been designed to ensure some spare capacity for future tie-ins, saving costs further down the road.

This is basically a project born of circumstance - and that circumstance is the current high oil price environment. ROC’s chief executive Dr John Doran said a key factor in the final development decision was the “general perception that near and medium term oil prices will not fall much below US$30 per barrel for any significant length of time.”

The field was discovered in December 2001, the first commercial oil discovery in the offshore Perth Basin. In early 2003 two successful appraisal wells were drilled, one of which flowed at 3,000 bpd, and the field was declared commercial in principle in October of that year. The final investment decision came after the successful drilling of Cliff Head-6 earlier this month, which intersected a 71 metre gross oil column and has been suspended as a future producer.

The field lies in shallow waters, some 11 km from the coast and 14 km from a dedicated onshore processing plant at Arrowsmith that will be built on a site formerly occupied by a lime plant. The crude will then be trucked some 350 km to the BP oil refinery at Kwinana, south of Perth. When it comes onstream this time next year, the field will pump some 10,000 bpd through facilities designed to handle 15,000 bpd.

The projects clocks up a number of firsts: it was discovered by ROC’s first well in Australia, it will be the first field to be developed in the offshore Perth Basin and the first oilfield to be developed off the Western Australian coast south of the Exmouth Sub-basin, some 1,000 km to the north.

It is also the first oilfield to be discovered and developed offshore Australia by a joint venture dominated by junior Australian oil companies. At the moment there are only four Australian publicly-listed companies that produce oil - as opposed to gas and condensate - offshore Australia: BHP Billiton, Woodside Petroleum, Santos and Tap Oil. When Cliff Head starts pumping, three more Australian public companies will join this list: Australian Worldwide Exploration (27.5 per cent), Voyager Energy (6 per cent) and ROC (37.5 per cent). The other co-venturers are Wandoo Petroleum (an affiliate of Japan’s Mitsui & Co with 24 per cent) and Cieco Exploration & Production (a subsidiary of ITOCHU Corp with 5 per cent).