re: drilling may be closer than we think!
This month the drilling ? ;)
Rocketing oil price puts tiny field in play September 3, 2005
Long wait is over: Beach Petroleum chief Reg Nelson in Bass Strait. Photo: Kevin Skinner
Oil from Bass Strait discovered 22 years ago will finally be extracted, reports Barry FitzGerald.
A SMALL oil field was discovered in Bass Strait in 1983 but left dormant because the cost to extract it made it impracticable.
Only now with the surge in oil prices to record levels and the can-do approach of the junior oil companies behind the project, Anzon and Beach Petroleum, is production close at hand.
The $260 million Basker-Manta project will be the first oil development in Bass Strait for seven years. It will also be the first outside of the Esso/BHP dominance of the oil province.
Sydney-based Anzon is a newcomer and brought the Basker-Manta deal to Beach, a company that has been knocking around the oil patch for more than 40 years.
Like Basker-Manta, Beach has been patiently waiting for its day in the sun.
Valued by the market at about $375 million on the strength of its oil and gas production interests in central Australia, Beach has set its sights on becoming a $1 billion company in quick fashion.
The arrival of record oil prices and the Basker-Manta project means that target is now in reach.
The group's chief executive since 1995, Reg Nelson, could not be happier.
AdvertisementAdvertisement An electrical engineer graduate from the University of Adelaide, Mr Nelson decided early on that engineering was not for him. Over his career, he has spent about one-third of his time in the minerals industry and about two-thirds in the oil and gas industry.
"It's probably the survival instinct: when oil and gas has been down and minerals has been up, you jump on to the next iceberg and keep walking," Mr Nelson recently wrote in an industry newsletter.
Both sectors are now booming but with oil at record levels and the growth spurt to come from the Basker-Manta project, the oil business is the place to be.
Mr Nelson said that once the oil price got moving, the Basker-Manta project went "screamingly ahead".
"It's been head down and go like crazy. I don't think a bigger company with all its bureaucratic processes and committees would have been able to do it."
A veritable who's who of Australian business discovered the Basker oilfield 22 years ago.
The joint venture was led by global oil giant Shell and included Rupert Murdoch's News Corporation and the TNT transport empire of the late Sir Peter Abeles.
At the time, the News/TNT combination owned Ansett. But the early 1980s were no different to today — airlines were buckling under the pressure caused by skyrocketing fuel costs.
Decades of cheap oil had come to an end in the 1970s thanks to two oil supply "shocks" caused by a string or wars, invasions and oil embargoes in the Middle East.
Oil prices which had ranged from $US2.50 to $US3 a barrel from 1948 through to the end of the 1960s had taken off, soaring to $US38 a barrel by 1980 ($US90 a barrel, inflation adjusted).
Mr Murdoch and Sir Peter had the idea that the best way to offset spiralling fuel costs was to find their own.
Along with Shell and the other partners in Basker, they did. But the relatively small size of the field compared with the 1 billion barrel monsters that the Esso/BHP partnership had found in Bass Strait meant that it would remain undeveloped — until now.
With the field too small to interest the big boys of the industry, Basker's ownership changed hands a number of times before ending up with the Anzon/Beach joint venture.
While Basker was never going to mean much to the big companies that once owned it, its "black gold" offers small companies such as Anzon and Beach a shot at some serious production.
Today's record oil prices of close to $US70 a barrel means that Basker's time has arrived.
The development plan of Anzon/Beach takes in Basker and the nearby Manta oil and gas field and the Gummy gas field.
Total reserves have been estimated at 42.5 million barrels of oil equivalent (it gives the gas an oil value) of which the centrepiece is the 23.3 million oil reserve at Basker-Manta.
At the Australian oil price of about $90 a barrel, the project should make a pretty penny. Analysts estimate that after capital and operating costs of about $25 a barrel, there should be a net back to the partners of about $65 a barrel.
Assuming it all goes to plan, the project could be producing 20,000 barrels of oil a day by the middle of next year. That is a drop in the ocean when compared with the world's daily consumption of more than 83 million barrels.
But with oil at record levels and the world industry struggling to keep up with demand, every little bit helps.
GOP Price at posting:
0.0¢ Sentiment: None Disclosure: Held
