bph is pep 11, page-2

Thanks to dajarra who picked this up and posted on MMR thread:

February 03, 2010.

MEC Resources Fine Tunes Its Seismic Sets Ahead Of Summer Test Of Potentially Gas-Rich Waters Off New South Wales.

www.oilbarrel.com

Australias booming natural resources sector, particularly its massive expansion in LNG capacity, means there is interest in any company claiming to sit on a serious amount of natural gas. And when that gas could lie just 20 km from Australias largest energy market in New South Wales rather than stranded in some remote outback, interest levels could really heat up.

That certainly is the hope of ASX-quoted MEC Resources, an investment company with interests ranging from biopharmacy to oil. One of its investee companies, Advent Energy has the right to earn an 85 per cent interest in the 8,100 sq km PEP11 licence in the offshore Sydney Basin, where the prospective resource could be a whopping 16 trillion cubic feet of gas in place, with a mean number of 7.5 tcf, lying just 20 km from Australias largest energy market.

This massive potential gas resource has, to date, been largely over-looked by the industry because this is a region that has traditionally relied on cheap coal for its power needs. But the new drive to cut CO2 emissions means there is a growing demand for cleaner-burning gas to meet future energy requirements not to mention the chance to supply Australias burgeoning LNG industry market, which is set to see the country become a top three LNG exporter within the next decade.

This is a long-way down the road for Advent Energy, however, which must first drill up the acreage to find the gas. Advent has integrated seismic data from 1981, 1991 and 2004 to build a picture of the potential here. It has identified gas chimneys, oil seeps and AVO and amplitude anomalies, all of which has increased its confidence in the acreage. This work is still ongoing: the reprocessing of the 2004 2D data is almost complete (and is said to show a market improvement on the original data set) and the reprocessed data is being evaluated for direct hydrocarbon indicators (and again, the early results point to increased confidence in the prospectivity).

Indeed, in its most recent update, Advent said the reprocessing work had validated existing drilling targets and identified further potential drilling targets. The largest of these is the Fish prospect, which alone carries a P10 prospective recoverable gas resource of over 9 tcf.

But the real test will be the drillbit, and this test is expected to take place over the summer. Water depths are shallow, about 120 metres, so drilling will be relatively inexpensive: last year MECs executive director David Breeze said he expected a day rate of around A$400,000 on a 30-day drill. Rig negotiations are at an advanced stage and the environmental approvals process is ongoing. The site survey will get underway once the seismic reprocessing work is completed and the final location for the first well has been selected. Advent has mandated Norways Pareto Securities to help it raise the funding for the well.

Should the drillbit prove up this potential, this could be a truly transformational project. The potential resource could not only supply the expanding gas demand of the Sydney region but also justify investment in a floating LNG plant to supply energy-hungry markets across the Pacific Rim. At which point, MEC Resources early backing of little-known Advent Energy would really begin to pay off for investors.