The company was established to develop and produce gas for the Western Australian (WA) domestic market from the Warro Gas Field, 200 km north of Perth.
The Warro Gas Field was discovered in 1977 by Western Australian Petroleum (WAPET) but was considered uneconomic at the time. Recent advances in drilling and completion technology combined with higher domestic gas prices have changed this outlook. The 1977 wells established a very substantial gas resource of over 5-trillion cubic feet (TCF) (in place) in tight sandstone reservoirs at a depth of about 4 000 m.
Latent Petroleum has secured two drilling slots on a new 1 500-hp national ideal rig capable of drilling beyond 5 000 m. The rig has been purchased by Fortune Drilling, a subsidiary of IPS Australasia (IPSAA) who will be providing drilling solutions to the Australian onshore drilling industry. The rig is currently under construction and scheduled to arrive in WA midyear, and commence operations at the Warro Gas Field during September 2008.
Latent Petroleum plans to drill the two wells during 2008 and carry out well testing operations to determine the most efficient means to extract gas from the Warro Gas Field.
The Warro Gas Field is 30 km to the east of the Parmelia and Dampier-Bunbury gas pipelines. The field contains high-quality gas suitable for domestic supply, and is expected to provide a substantial, secure and long-term supply of gas to WA soon after development approval is granted.
Latent Petroleum MD Stephen Keenihan says that, depending on the outcome of the drilling programme, Warro could be in production by early 2009 at an initial rate of 20-million cubic feet of gas cubic feet (MCF) a day, climbing to 100 Mcf a day.
“Tight gas, such as that at Warro, has not previously been economic to develop in WA, but the recent price rise in the WA domestic gas price together with Latent personnel’s extensive experience in tight gas production will bring Warro into production,” says Keenihan.
Latent chairman Charles Morgan says that the Warro field fitted the State government’s publicly announced support for the development of tight gas in WA.
“Warro will provide the southwest with an alternative and new supply of gas to keep up with the increasing demand for energy for the domestic market. Events in recent days have highlighted the importance of an expanded range of sources for domestic supply,” says Morgan.
Latent currently owns 100% of the Warro Field and this project is its sole focus.
The Warro Gas Field is located onshore in the Perth Basin, about 200 km north of Perth. Independent geological assessments have indicated that the field could contain between four and seven TCF of natural gas-in-place and is located 30 km from both the Dampier Bunbury natural gas pipeline and the Dongara Perth Parmelia pipeline.
This provides ready access to existing markets which, combined with the significant increases in WA gas prices and advances in drilling and reservoir stimulation technology, make the Warro Field a very attractive development opportunity.
Warro Project History
The Warro Gas Field was discovered by WAPET in 1977 with the drilling of Warro-1, which penetrated several hundred m of gas-saturated sands in the lower part of the Late Jurassic Yarragadee Formation.
As a follow-up to the discovery of this significant gas column, WAPET drilled the appraisal well Warro-2 in 1977 and 1978. Good gas shows were encountered from 3 780 m to TD at 4 854 m and a number of cores were cut. Subsequent log analysis showed the presence of gas-saturated sands over a 393 m interval of the Yarragadee Formation. The log analysis and core samples demonstrated that the formation was a ‘tight gas play’, this being gas held within low porosity and permeability sands. As with other tight gas plays, these sands require reservoir stimulation to produce gas at commercial rates.
WAPET chose two zones within the Yarragadee for stimulation, which resulted in flows of 104 Mscf a day from the interval 4 091 m to 4 120 m and 80 Mscf a day from the interval 3 991 m to 4 073 m. While these results were encouraging, they were not deemed commercial at the time.
As with many tight gas plays of that era, the low flow rates from these tests were misinterpreted to conclude that the reservoir was incapable of producing at commercial rates. It has since been proven that stimulations conducted during this era were not effective at the temperature and pressure encountered at these depths.
It has been shown that the fluids used during drilling and stimulation actually had a detrimental impact on the reservoir’s production performance. Petrographic and clay mineralogy studies by CoreLab in 1999, indicate that the Warro sandstones are susceptible to formation damage by water-based drilling fluids, and that the stimulation treatment used in Warro-2 failed due to the use of water-based transport fluids and inadequate proppants.
It is now 30 years since these two wells were drilled and tested. During this time, there have been significant advances in drilling and stimulation technology and the understanding of reservoir properties.
Through the development of underbalanced drilling techniques and advances in fluid technology, tight gas plays now have the potential to be commercially viable.
Analogous US gas field
The Warro structure is a large compressional anticline with 6 879, 80 ha of four-way dip closure, defined by a two-dimension seismic grid. The structure is located close to the basin bounding the Darling fault system.
In May 2000, a report by the Scotia Group reviewed the Warro Field and compared it with an analogous field being the Jonah Field in south-west Wyoming, US. The Jonah Field was also discovered in the early 1970s, however, fracture stimulation treatments were damaging to the formation and wells that tested positive for gas were not deemed commercial.
It was not until the mid-1990s that the field was re-entered and with modern completion techniques Jonah was established as one of the most prolific gas fields in North America. It currently produces 680 MMscf a day from 2 400 wells with a total estimated recovery of greater than 14 TCF.
The Warro-1 and the Warro-2 wells have a number of significant similarities to the Jonah Field. Some characteristics in the Warro Field are considered superior to those found at the Jonah Field. The thickness of the pay intervals are greater, more laterally continuous and have higher permeability than the Jonah Field. The lateral continuity of these sands suggest larger drainage areas for each well and makes the field a candidate for horizontal drilling, both of which reduce the number of wells required to develop the field.
To assess the production potential of the field, Schlumberger were commissioned to undertake a reservoir characterisation and stimulation evaluation in September 2007. The reservoir simulation work by Schlumberger indicated that if the Warro wells are successfully stimulated by hydraulic fracturing using the appropriate frac fluids and proppant, an initial flow rate of between five and seven MMscf a day could be achieved from vertical wells. These wells could recover about six-billion cubic feet over a 20- year production life.
For horizontal wells, the simulated production from a well drilled with a 600 m lateral section, and with four stimulations, is projected to be between 15 and 29 MMscf a day. These wells could recover between 26 and 42-billion cubic feet over a 20-year production life. Decline rates for both well types are modelled to be hyperbolic, being from 25% to 30% a year over the first ten years.
Assuming a well spacing of 16, 19 ha for vertical wells or 48, 56 ha for horizontal wells, the Warro Field has the potential to host up to 420 vertical wells or 140 horizontal wells. Independent geological assessments have indicated that the field could contain between four and seven TCF of natural gas-in-place. The Schlumberger work indicates that about 50% of this is potentially recoverable.
WA Gas Market
The rapid growth in demand resulting from the current mining boom, combined with capacity constraints on pipelines and the increased cost of gas development and production has seen prices for domestic gas move closer to those of liqufied natural gas. The contracted gas prices in WA have increased substantially in recent years from old contract prices of around $2 for each giga Joule to be currently being in excess of $7 for each giga Joule.