South Australia’s exploration sector is in strong shape. SA’s economic development agency Primary Industries and Resources SA (PIRSA) reports.

Petroleum exploration and development
At the end of 2010, 57 petroleum exploration licences (PELs) and 48 PEL Applications (PELAs) were current over the state’s onshore petroleum prospective areas, over 198,868 km2 (Fig. 1). Onshore exploration licences are located in the productive Otway and Cooper basins, frontier Officer, Arrowie, Stansbury and Arckaringa basins, and over Cainozoic basins with coal seam methane potential.

A total of 61 wells were drilled for petroleum and geothermal resources in 2010:

• 29 drillholes to assess underground coal gasification resources in the Walloway Basin,
• 1 drillhole to assess coal seam gas resources in the Cooper-Eromanga Basin,
• 10 drillholes to asses geothermal resources (9 drilled to less than 500m, 1 drilled to ~4,000m (Panax Salamander 1, Otway Basin), and
• 21 conventional petroleum drillholes including 8 exploration wells (only 2 of which were in the Cooper Basin due to flooding) and 13 development wells (all in the Cooper Basin).

Cooper Basin activity dropped in 2010 as a result of extensive flooding, which is still impacting drilling and seismic surveys. PIRSA’s offer of suspension-extensions for petroleum exploration licences (PELs) affected by the flooding has been taken up by many operators. Deferral of 2010 work programs for (largely) force majeure reasons corresponds to approximately 12 wells, and seismic surveys totalling 700 km 2D and 100 sq km 3D.

Exploration in the state’s offshore basins has received a massive boost with the grant of four new Exploration Permits for Petroleum (EPP) in the Bight Basin to BP in early 2011. Bids closed for two blocks in the Duntroon Basin in November 2010 and announcements are expected in 2011.

Onshore work programs in 2011 will see further drilling and seismic acquisition to explore the potential of onshore oil plays in the Otway Basin, oil plays in the Arckaringa, Eromanga, Cooper, Officer and Walloway basins and conventional and unconventional gas plays in the Cooper Basin.

PIRSA has continued to provide stewardship for Australia’s geothermal sector continues to foster the sector’s development and cohesion.

Royalties and production Petroleum
royalty payments to the state in financial year 2009–10 were $56.7m, with estimated total product sales of $969.8m (Fig. 2), bringing the cumulative royalty paid since 1970 to $1.882b (2010 dollars) and cumulative sales to an estimated $33 364b (2010 dollars). Since 1991 the average royalty paid equals 6.81 per cent of the sales value in South Australia. Annual sales of key South Australian petroleum commodities are shown in Figures 3–7.

Onshore production licences
Onshore, at end 2010, there were 201 petroleum production licences (PPLs) in place in the Cooper and Otway basins.

Onshore exploration licences
Three new PELs were granted in 2010, PEL 558 was granted to Liberty Resources and PEL 174 granted to Energy Exploration Limited both in the Murray Basin. PEL 516 (Cooper Basin, CO2009-E block) was granted to Stuart Petroleum following signing of a conjunctive indigenous land access agreement.

The right to negotiate (RTN), Indigenous Land Use Agreement (ILUA) and legislation-specific processes consistent with the Federal Native Title Act 1993 have been effective in South Australia. The relevant registered native title claimants, petroleum explorers and the state government have concluded access agreements for 40 licence areas — seven in the Arckaringa (all via RTN), 30 in the Cooper (one via ILUA and 29 via RTN), one in the Officer (via RTN) and two in the Arrowie Basin (via RTN). Two land access agreements have been concluded between Aboriginal land owners and companies in the Officer Basin. All 42 of the South Australian land access agreements cover the full cycle of petroleum activities including exploration, development and production.

In February 2007 the Yandruwandha/ Yawarrawarrka peoples entered into the first petroleum ILUA. The agreement, over ~40,000 km2 in the South Australian Cooper Basin, was the first conjunctive petroleum ILUA in a producing basin in Australia. Negotiations for additional ILUAs are progressing with the two relevant native title claim groups over the remainder of the Cooper Basin.

The RTN process for PELAs 512 – 516 (ex Cooper Basin acreage release blocks CO2009 A – E) was instigated (in parallel to ongoing ILUA negotiations for the Cooper- Eromanga region) in December 2009. Both the RTN process and the ILUA negotiations are expected to be concluded with essentially common terms in 2011. This will allow the grant of the remaining four new Cooper- Eromanga Basin PELs immediately after the signing of RTN agreements, so not to delay grants during the six month registration period for ILUA Agreements.

Bidding closed on 10 March 2011 for three new PELAs in the Cooper Basin (CO2010-A, B and C). Block CO2010-D was not be included in the acreage release because flooding has delayed the scheduled partial relinquishment of PEL 111.

Work programs and licence documents, including the terms prescribed in native title access agreements, are available on the PIRSA website http://www.pir.sa.gov.au/petroleum/licensing/register.

Onshore exploration activity
South Australian petroleum exploration and drilling activity levels have dropped this year as a result of major flood events in the Cooper Basin region. Exploration, development and appraisal drilling and seismic statistics are shown in Figures 9 and 10.

Drilling
Seven conventional petroleum exploration wells were drilled in South Australia in 2010, three in the Officer, two in the Otway and only two in the Cooper Basin PELs. Figure 12 shows the oil exploration success rate trend for the South Australian Cooper – Eromanga Basin since oil exploration commenced and Table 1 summarises results since 2001 when new operators started exploring the basin.

Geophysics: Four seismic, one airborne gravity/magnetic and one time domain electromagnetic survey were undertaken in 2010. Company seismic acquisition for the year totalled 213 km2 of 3D data and 457 km of 2D, a significant decrease in activities from previous years due largely to the flood events in the north of the state. No seismic surveys were conducted offshore. Only one seismic survey was completed (213 km2 in the Cooper Basin before the floods caused a cessation to field activities, two in the Officer Basin (361 km to years end) and one in the Otway Basin (96 km). A combined gravity and magnetic airborne survey was recorded over a portion of the Arrowie Basin for a total of 903 line km of data.

Conventional onshore petroleum exploration outlook
Up to 32 petroleum exploration wells are included in licensee work programs in South Australia in 2011and a total of 1932 km of 2D and 70 km2 of 3D seismic has also been programmed:

Cooper Basin: Exploration activity in 2011 is forecast to include 17 exploration wells and 1262 km of 2D seismic, based on licensees’ work programs. However, there is a large backlog of drilling and seismic acquisition in the Cooper Basin due to delays caused by flooding and activity levels may be even higher.

Otway Basin: In 2011 up to five wells and 70 km2 of 3D and 100km of 2D seismic acquisition are included in current licence work programs. President Petroleum have announced that Northumberland 2 exploration well will be drilled in early 2011.

Frontier basins: Three exploration wells and 250km 2D seismic acquisition are included in company work programs in the Officer Basin and seven wells for coal seam gas.

Unconventional gas
CSG and UCG: Six companies are currently investigating CSG and/or underground (in situ) gasification opportunities in South Australia. Currently there are nine PELs and six PELAs under consideration to evaluate the CSG potential and/or underground coal gasification potential of SA coals. Known coal deposits and relevant PELs and PELAs are located in Figure 12. In 2010, Linc Energy drilled 29 shallow wells in the Walloway Basin in PEL 120 to evaluate the potential for underground coal gasification. Strike Energy drilled Forge 1 in PEL 96 to commence exploration for coal seam gas in the shallowest Permian coals in the Cooper Basin.

Coal seam gas exploration in 2011 includes up to three exploration wells in the Arckaringa Basin and 100km of 2D seismic acquisition is programmed to explore for CSG in the southern Cooper Basin. Underground coal gasification exploration and appraisal in 2011 includes two drill holes in the Walloway Basin.

Shale gas: Beach Petroleum are a first mover to test the shale gas potential of the Roseneath-Epsilon-Murteree play in the Nappamerri Trough. Encounter 1 spudded in October 2010 and the rig was released in December. Preliminary results are very encouraging, with Beach reporting that the target shales are interpreted to be fully gas saturated. Beach’s second shale gas well, Holdfast 1, spudded in January 2011.

Unconventional Gas Roundtable: In 2010, PIRSA and the SA Department of Transport Infrastructure and Energy established a roundtable (interest group) with industry to assess the adequacy, or otherwise, of supply chain infrastructure and technologies necessary to support unconventional gas prospects. Peak industry representative bodies, holders of South Australian petroleum and coal licences and infrastructure enterprises have been invited to participate. The objective is to inform industry strategies and government policies to underpin optimum upstream-downstream life-cycle planning for the deployment of capital, technologies and infrastructure for exporting unconventional petroleum gas and liquids.

Gas storage licences
In 2009, the new Petroleum and Geothermal Energy Act 2000 opened the State for ‘overthe- counter’ Gas Storage Exploration Licences (GSEL), while preserving storage entitlements in pre-existing petroleum licences. The first Retention Licence (GSRL) was granted in the Otway Basin, and twenty-five GSELs in the Offi cer Basin were applied for in 2010. No royalties are levied for gas stored as an incentive for CO2 geosequestration projects in SA.

Offshore petroleum exploration
All offshore SA basins are only lightly explored; however, potential exists for giant petroleum accumulations in the Otway and Bight basins. Two exploration petroleum permits (EPPs) were current in Commonwealth waters at the end of 2010, however four new EPPs were granted in January 2011 (Fig. 13). Blocks S09-1 to 6 (Bight Basin) and Block S09-7 (Otway Basin) were available for applications to 29 April 2010, S09-2,3 and 7 did not attract any bids. BP Exploration (Alpha) Ltd was successful in bidding for blocks S09- 1, 4, 5 and 6 and were granted EPPs 37 to 40 inclusive on 17 January 2011. The permits are subject to additional stringent conditions to reflect lessons learned from the Deepwater Horizon accident in the Gulf of Mexico.

BP has guaranteed to undertake a primary exploration program worth about $605 million with the acquisition of 11,400 km2 of new 3D seismic surveying within the first two operational years along with the drilling of four exploration wells in the third operational year (summer of 2013-14). The secondary exploration program includes an additional 6 deepwater wells and 5000 km2 of 3D seismic (at a cost of $832 million) which brings total investment to $1.437 billion over six years.

Two eastern Bight Basin acreage release areas (Blocks S10-1 and S10-2) were opened for bidding in April 2010 in the Commonwealth Offshore Acreage Release. The blocks are located in the Duntroon and Ceduna sub-basins. Bids closed on 11 November 2010 and are currently being assessed by the Joint Authority.

In March 2009 OTWY-01 (Otway Basin) was released by the Commonwealth for exploration of greenhouse gas storage potential, with nine other areas around Australia. Bids are expected to close in mid-2011 once the Regulations have been promulgated.

Geothermal Exploration and Proof-of-Concept Projects
The South Australian Government is leading Australia with expeditious and effective processing of activity approvals for geothermal energy, and the last few years have seen a rush for licences to explore a variety of geothermal energy plays. The number of current GELs

and GEL applications (GELAs) in South Australia total 248 as at 31 December 2010, covering 131 343 km2 (Figs 14, 15). Whilst not all may eventuate, the aggregate investment for guaranteed and non-guaranteed research (exploration), proof of concept (appraisal) and demonstration (pilot development) in these 248 GELs and GELAs is estimated to be in excess of $1,383m for the 14-year term 2002–15, and that tally excludes commercialin- scale deployment. This corresponds to almost 60 per cent of all licence applications in Australia (at 31 December 2010). Indeed, to year-end 2010, South Australia’s hot rock resource potential and supportive investment frameworks have attracted about 87% (estimate: $584 million) of the Australian national tally of investment in licensed geothermal exploration and proof-of-concept investment (estimate: $672 million).

Drilling and geophysical surveys
A total of 10 wells were drilled in GELs in 2010, which brings the total number of geothermal wells drilled in South Australia to 66 and the cumulative tally of drilled metres to over 76,000 m. Of these wells, only six are considered to have been drilled to the target objective (Habanero 1, 2 & 3; Jolokia 1, Salamander 1 and Paralana-2). 2010 industry activities and 2011 industry plans and interim summary of activities A summary of the key activities undertaken in the annual review period by holders of South Australian Geothermal Exploration Licences and Geothermal Retention Licences is given below.

Geodynamics Limited. Operates GEL 211, Geothermal Retention Licences (GRLs) 3 – 12 and GRLs 20 – 24 in the Cooper Basin. Geodynamics have drilled five deep geothermal wells since 2003, Habanero 1 – 3, Jolokia 1 and Savina 1. The geothermal reservoir in the Habanero wells is a watersaturated, naturally fractured basement granite (250ºC at 4,300 m as reported by Geodynamics) with permeability that was effectively enhanced by fracture stimulation. A 1MW pilot plant with transmission lines to Innamincka was built at the Habanero site, however progress was delayed by a well control incident in 2009.

In February 2010, Origin Energy and Geodynamics announced the establishment of a 50:50 joint venture to focus on the Hot Sedimentary Aquifer play that overlies the Hot Fractured Rock play in their Cooper Basin Project. Origin is the Operator of this ‘Shallows’ Joint Venture.

Petratherm Limited. Petratherm is the operator of GELs 156–158, 178–180, 254 and 336 in the Mount Painter region in the northern Flinders Range, and GELs 241 and 242 in the Renmark region. In 2009 the company drilled Paralana 2 (4012m) to test a Heat Exchanger Within Insulator (HEWI) play and conducted mini-fracture stimulation operations in January 2011 as a precedent to a multi-zone hydraulic stimulation in 2011. Contingent on the outcomes of operations in Paralana 2, a second deep well, Paralana 3, will be designed and drilled as the first production well, followed by construction of a 3.75 MW pilot plant planned for 2011 - 2012. Petratherm were also the successful recipients of a federal government Renewable Energy Demonstration Program grant of $62.7 million to cover up to one third of the cost of the planned Paralana 30 MW. The longer term aim for the Paralana project is to develop a large scale, base load geothermal power station of greater than 260 MW capacity which would supply power to the National Electricity Market (NEM). Petratherm have two significant Joint Venture partners for the Paralana Project. Beach Energy Ltd entered an agreement with Petratherm in early 2007, to contribute up to AU$30 million (US$27 million) for a 36 per cent interest in the Paralana project, while TRUenergy (a wholly owned subsidiary of China Power and Light) agreed to pay up to AU$57 million (US$52 million) to earn 30 per cent equity in the Paralana Project in August 2008.

Panax Geothermal Limited (including its wholly-owned subsidiary – Osiris Energy Pty Ltd). Panax Geothermal is the operator of contiguous GELs 170–173, 184, 212, 223 and 484 to evaluate a hot sedimentary aquifer (HSA) play in the Otway Basin and GELs 220–221, 281 in the Cooper Basin where both hot sedimentary aquifer and hot fractured rock plays are known. Panax was granted GEL 502 in 2010.

With the support of a Federal government $7 million GDP grant, Panax Geothermal drilled Salamander 1 to 4025m in 44 days in early 2010 to test its Penola Geothermal Project. The company’s assessments of well data conclude the measured bottom hole temperature is 171 °C at 4000 metres; the target has an average 13.2 per cent porosity in 675m of net reservoir over the interval 2,900-3,570m, and an average of 10.2 per cent porosity in 411m of net sandstone reservoir in the interval 3,570-4,000m. The wireline log ‘most likely’ transmissivities in these net reservoir zones is 6.7 Darcy metres (Dm) and possibly as high as 13.5 Dm. The well test results show that the transmissivity of the well significantly decreased with each successive production/discharge test, with the final test showing a transmissivity of less than one tenth of its starting value. Also, results clearly indicate that the acid treatment, which was carried out after the fourth discharge test, decreased the remaining transmissivity by approximately 50 per cent. The company has stated its current detailed examination of information gained from the drilling of Salamander-1 will inform optimised well completion program for this Penola HSA play. Panax Geothermal has plans to develop the Penola Project in stages. Phase 1 entails commissioning of a pilot generation plant serviced by three production wells including Salamander 1. Phase 2 requires drilling of additional production and injection wells and commissioning of a 59 MW (net) plant.

Torrens Energy Limited. In 2010 Torrens Energy added GEL 559 to its extensive exploration portfolio and now holds 27 geothermal licences spread across three project areas covering over 13,850 km2 in South Australia. These projects are: Torrens (GELs 230–235, 278, 285, 407–410, 501 and 559); Barossa–Clare (GELs 227–229, 263, 425 and 481-483; and Adelaide (GELs 226, 260–262 and GELAs 266 and 293). During the year, Torrens Energy drilled 7 heat flow wells between 63 and 400 metres in depth for the Barossa Project. Torrens has reported measured heat flows as follow:

• Parachilna Project area: up to 120mW/m 2;
• Port Augusta Project area: up to 101mW/ m2; and
• Barossa Project area: up to 75 mW/m 2.

Torrens Energy finalised the deed for a $7m grant for its Torrens Project from the federal government’s Geothermal Drilling Program in September 2010. Torrens Energy is continuing work to support the drilling of their first deep well Elendil 1 in its Torrens Project in 2011.

Green Rock Energy Limited. Green Rock was granted GEL 557 in 2010, and is the licensee/applicant for GELs 128–129, 161– 163, 206, 213 and GELAs 325–328 around BHP Billiton’s Olympic Dam Mine. Green Rock also hold GELs 244–248 over the western and eastern shores of the upper Spencer Gulf and GELs 366–376 and negotiations are in progress in relation to GELAs 243 and 349.

Geothermal Resources Limited. The company is progressing exploration activities on EGS projects in GELs 181, 208–210, 222, 279–280 and 491 - 493 in the Lake Frome region (east of the Honeymoon uranium mine), and Hot Sedimentary Aquifer projects in GELs 214–217, 249–250 and 498 in the South East on the northern margin of the Otway Basin.

Deep Energy Ltd. GELs 308 and 311–315 over the western and southern margins of Lake Frome were granted in 2008. In 2010 two wells, Peter 1 (252m) and Mark 1A (240m) were drilled in GEL 312.

Earth Heat Pty Ltd (a wholly owned subsidiary of Fall River Resources Ltd.) operate GELs 503 – 507 and GELs 337–339.

Inferus Resources Pty Ltd (a wholly owned subsidiary of Southern Gold Ltd.) relinquished all of their GELs in 2010.

Gradient Energy Australia Pty Ltd. (A wholly owned subsidiary of Planet Gas Ltd.) operate thirteen licences over the northern Eromanga Basin (GELs 354–365, 377),and 14 licences (GELs 448–461) around Leigh Creek.

Roxby Geothermal Pty Ltd applied for three GELs (563-565) in 2010, over 8922 km2 over the Stuart Shelf area in 2010.

Earth Heat Australia Pty Ltd was granted GELs 503-507 and 523-525 in the Adelaide Geosyncline in 2010.

Strike Energy Limited were granted GELs 526 and 527 over 4207 km2 over the south -eastern Eromanga Basin in 2010.

Exploration outlook for geothermal exploration
Key activities anticipated to be undertaken in the 2011 term include: preparations for drilling of Habanero 4 and Habanero 5 wells by Geodynamics in the Cooper Basin; the hydraulic stimulation of Paralana 2 well in the northern Flinders Ranges by Petratherm Ltd; and the drilling of 2 wells to about 2,000m by joint venture partners Geodynamics and Origin Energy in GRL8 to test Hot Sedimentary Aquifer targets in the Eromanga Basin that overlies the hot granites targeted in Habanero 1-3, Savina 1 and Jolokia 1.

The Petroleum Group, Minerals and Energy Division, within the Department of Primary Industries and Resources (PIRSA) manages SA’s petroleum resources on behalf of South Australians. It is the lead agency facilitating ecologically sustainable petroleum exploration and development in SA. Its operations cover the promotion of SA petroleum acreage opportunities through provision of geoscientific data and information, regulation of the petroleum industry through policy and legislation, and optimisation of royalty income streams.