Central Petroleum’s CEO Richard Cottee brings off a coup with a pipeline deal from Australia’s Northern Territory to east coast gas markets

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Central Petroleum’s CEO Richard Cottee brings off a coup with a pipeline deal from Australia’s Northern Territory to east coast gas markets
Drilling for gas in Central Australia

By Stewart Dalby

Central Petroleum has amassed what it says is the largest package of proven and prospective oil and gas acreage across central Australia at a critical time for Australia’s energy supply. We last wrote about Central in July (2014) when we said that two years on from the bruising boardroom struggles that marked the start of the turn-around at Central, the ASX-quoted E&P had become a changed animal.

Whilst retaining its vast tracts of land in the emptiness of central Australia, Central  achieved first oil on its Surprise field in the Northern Territory’s  (NT) Amadeus Basin which it acquired in April 2014. Before that, in February 2014, it added to its portfolio by acquiring assets from Magellan Petroleum (for A$35 million) which included the gas producing Dingo and Palm Valley fields west of Alice Springs, again in the Amadeus Basin. It also gained the backing of credible partners through farms- in and backing from majors Total and Santos to fund the bulk the exploration effort, most notably in the South Georgina JV, to the tune, initially, of A$40 million..

CEO Richard Cottee told Oilbarrel that Palm Springs were producing around 5 to 6bcf of gas from around 6 wells. He said that there could be more production but there was an exit constraint. Central Australia or rather the NT has always suffered from what is called the tyranny of distance. Australia is a vast country and the NT is thinly populated and a long way from the more densely populated east coast. Because Australia is now exporting a lot of its gas as LNG, the east coast has become gas hungry and prices have risen. The problem has been that sceptics have always said that a pipeline from the NT to the east coast would be impractical and uneconomic because of the amount of gas that is currently produced as opposed to could be produced).

Late last year (in November), however Cottee confounded his critics  about the idea of  NT gas supplying eastern manufacturers, by signing up Incitec Pivot in a conditional deal that could be worth over A$1 billion. The initial accord struck by Mr Cottee with his long-time friend, Incitec Pivot CEO James Fazzino, envisages deliveries of 15 petajoules (circa 15 bcf) of gas a year for ten years, potentially starting in 2018.

The viability of a NT pipeline has been questioned by critics who say it would require more customers and a greater number of suppliers. Cottee has said, “We are clearly stating that you can produce Northern Territory gas at a price acceptable to manufacturers on the eastern seaboard.” He has indicated that rather than a double figure price for a gigajoule of gas (around 1000 cubic feet), a price of A$8 a 1000 cubic feet (Mcf)  would be feasible. Cottee said to Oilbarrel there is already a development programme underway on Dingo and Palm Valley. “We could easily ramp up to 8 bcf  with more wells in the foreseeable future and much more after that, Cottee said.

Central has also been moving on other fronts. The Whiteley-1 unconventional gas exploration well in ATP912 of the Southern Georgina Basin was spudded last July and was followed by a second well Gaudi-1 in ATP909. These will be followed by a third well. These wells are the first to be drilled under the company’s joint venture with French oil giant Total.  The company has not given any potential output figures, but the core samples from the first two wells are said to be encouraging.

The wells are exciting because they could open a whole new province for Central and complete its transition from a frontier explorer to a multi-well producer. It is not all positive news, however. Its maiden oil development, the Sunrise oilfield, is producing below expectations at 157 bopd. The collapse in the oil price has started to devastate income. Cottee told Oilbarrel the company would have to think what it would do with this asset.

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