community opposition to unconventional gas is growing

Lakes Oil is looking for Tight gas in the area between Geelong and the Surf Coast.

Get involved.

To get involved, contact Chloe Aldenhoven. [email protected]

Public forum, Deans Marsh, Nov 25.

Come along to the meeting in Moriac.

Lakes Oil

Lakes Oilis the main player exploring forunconventional gas in western Victoria. See below for a summary.

While concerns about coal seam gas (CSG) drives a lot of debate about unconventional gas operations, Tight Gas will come into stronger focus if the current moratorium on the process of fracking is lifted.

Lakes Oil (LO) is the oldest oil and gas explorer in Australia and the key player in the development of Tight Gas in Victoria. While they have carried out decades worth of exploration, they have had no commercial production of gas. However, the company  believes that it is getting closer to the development of an on-shore gas industry because of previous exploration and lower costs compared with off shore production and rising costs of gas.

Through its subsidiaries, Lakes is pursuing a range of unconventional oil and gas options in Victoria, including shale and tight gas, and coal in several very productive dairy regions on the Gippsland Plains.

Lake Oil has operations in the Gippsland basin, Otway basin and Eromanga basin in Australia. In the Gippsland basin, the company operates through PEP 166 and PRL 2 permits. Its onshore Otway basin operates permits: PEP 163, and PEP 169.

They have said publically that they want to see gas production from coal for use in power stations in the Latrobe Valley.

Lakes Oil has been looking for Tight Gas in Gippsand since the early 2000s, and according to its website, has spent $50 million in the search to date.

In 2000 the company found gas at the North Seaspray and Trifon fields (Tight Gas) and in 2004, it discovered the Wombat field – this is now the most advanced of their holdings and subject to ‘retesting’ operations at present.

Lakes has traditionally relied on bringing other companies into it’s exploration activity in order to generate income.

In early 2013, it was announced that Gina Rinehart’s company Hancock Prospecting had invested in Lakes Oil through a convertible notes issue.

At the time, Friends of the Earth said:

“Lakes is generally seen as being an old school oil and gas company. Despite never having produced any commercial quantities of gas, it has long believed it will be able to open up new oil and gas operations in the state. It is hardly surprising that well known climate sceptic Professor Ian Plimer has been appointed as a non-executive director of Lakes Oil as part of this deal”.

“This cements Lakes Oil reputation as being a 20th century company chasing fossil fuel production in some of our best agricultural land. It is hard to imagine such an industry will get social license to operate given the real risks that would come to farming and water supplies.”

It's interests in coal are also troubling.

On 29 March 2011, Lakes Oil reported that in addition to its tight gas discoveries in the Gippsland Basin, the company aims to develop an extra exploration focus on coal which, if successful, “could lead to the establishment of state-of-the-art power stations with less carbon output. Lakes is of the opinion that in the past, too much attention was paid to shutting down production of electricity in the Valley because of CO2 emissions instead of looking at how this unique Victorian asset can be better developed, and at the same time reducing the carbon footprint. Lakes is in a strong position to achieve both results”.

Lakes Oil gas fields:

PRL 2

A Petroleum Retention Lease (PRL) is the second stage in the development process: the first is an exploration permit (PEP). If a discovery is made, the company can apply for a PRL and be allowed up to 15 years to turn the find into commercial production. If the company wants to move into commercial production, at this point a Production License would be required.

PRL 2 includes a series of fields, including the WOMBAT & TRIFON/ NORTH SEASPRAY fields, plus a number of prospects. The Greater Baragwanath anticline goes from near Morwell to Longford and covers both PEP166 and PRL2. The BOUNDARY CREEK site is located at the far eastern end of the anticline, on the Longford Dome.

PRL 2 is owned by LO, in partnership (2010) via farm-in agreement with Beach (who also have shale interests in Cooper Basin, SA, and QLD). Beach must match LO’s previous investment to become 50% partners in the operation.

Beach earns interest in LO holdings through drilling – they will share in percentage of any resulting commercial production.

These are Tight Gas fields – which generally require a frack in order to flow (offshore gas deposits in VIC are generally free flowing, and don’t require fracking). Lakes carried out test fracking at a number of sites within PRL 2 about a half decade ago. They now intend to have their old sites ready for an additional round of fracking as soon as the Victorian governments moratorium is lifted.

What is Tight Gas?

Source: Rigzone.

Tight gas refers to natural gas reservoirs locked in extraordinarily impermeable, hard rock, making the underground formation extremely "tight." Tight gas can also be trapped in sandstone or limestone formations that are atypically impermeable or nonporous, also known as tight sand.

While a conventional gas formation can be relatively easily drilled and extracted from the ground unassisted, tight gas requires more effort to pull it from the ground because of the extremely tight formation in which it is located. In other words, the pores in the rock formation in which the gas is trapped are either irregularly distributed or badly connected with overly narrow capillaries, lessening permeability -- or the ability of the gas to travel through the rock. Without secondary production methods, gas from a tight formation would flow at very slow rates, making production uneconomical.

Artificial stimulation, such as fracturing and acidizing can increase the flow rates of gas
Additionally, acidizing the well is employed to improve permeability and production rates of tight gas formations. Acidation involves pumping the well with acids that dissolve the limestone, dolomite and calcite cement between the sediment grains of the reservoir rocks. This form of production stimulation helps to reinvigorate permeability by reestablishing the natural fissures that were present in the formation before compaction and cementation.

Furthermore, deliquification of the tight gas wells can help to overcome some production challenges. In many tight gas formations, the reservoirs also contain small amounts of water. This water can collect and undermine production processes. Deliquification is achieved in this instance through artificial lift techniques, such as using a beam pumping system to remove the water from the reservoir.

where are the drill sites?

Gippsland

According to Lakes Oil, wells within PRL 2, all containing Tight Gas sandstone with ‘significant potential’ include:

·    Boundary Creek – 2. Located about 7km SE of Longford.  (The resource sits between 700 & 1,000 metres and deeper). The company is aiming to do 3 to 4 fracks into a sand ‘package’ of 200-300 metres thickness, which sits between 750 and 1050m below ground level.
·    Macalister-1
·    North Seaspray-3
·    Trifon- 1&2. In 2004, Lakes found hot water reserves in the Trifon field which may be suitable for energy production via geothermal power.
·    Wombat 1 - 4 (they intend to do 3 to 4 fracs at the deepest levels before looking at shallower zones). This appears to be the best yielding site to date. It has up to 20 prospective zones for drilling.

Wombat Field

The Wombat field is in the area between Seaspray and Longford, in Gippsland.

In 2011, the company stated that:

“All the Wombat wells have flowed gas to surface with Wombat 2 having an average flow over a 12 day period of 800,000 cubic feet per day from just one zone. The nature of tight gas in this formation is that the gas occurs over a significant thickness and in fact none of Lakes’ wells have reached the base of the gas zones in the Strzelecki Group. This leads us to believe that we have discovered a major new gas resource for Victoria”.

Wombat 1

This is currently undergoing a ‘testing program’ (May 2013) to see what gas remains in the wells that had previously been drilled and fracked. This gas is currently being burnt (flared).

See an ABC news item on this activity here.

Wombat 2

Was fracked in 2004 and 2009 to depth of 1550 metres with 2 &7/8 inch tubing strings inside a 7 inch casing.

The company says it used ‘acid injection and nitrogen lift’ operations to increase the flow rate of gas. It used 2% aceitic acid and 40bbi of bentonite (it has been suggested that this could cause formation damage in the sandstone).

Halliburton did the assessment of the frack (the developer needs an independent party to show that the figures on resource are legitimate). Halliburton appears to have been critical of the frack operations. There were no significant gas flows. Formation blockage caused limited flow. Some drilling just produced water. According to Lakes Oil, they drilled to depths of 1400 to 1500 metres.

The capping and re-opening between fracks can cause loss of resource through venting/ bleeding of gas.

There was a small fire on site in 2010. Check here for additional information on this incident.

Wombat 3

This well produced some oil when fracked at 2,100m (this was apparently the first oil recovered from the Strezlecki group).

Wombat 4

Lakes Oil says that around W4 “up to 27 potential gas zones have been identified as fracture targets which are possibly gas producing”.

[above: the Wombat 2 site]

The Otways

The following information comes from Greens MP Greg Barber:

Lakes Oil have been quietly drilling for gas in the Otways under petroleum exploration permits PEP163 and PEP169. 

These were issued under the Petroleum act for 'tight gas' not the MRSD Act for Coal Seam Gas or CSG. One permit allowed for 3 wells and to 'frack' one, the other permit for one well, drilling only.

Next step for the company would be either more exploration, a 'retention lease' (allowing them to hold onto their rights to gas not commercially viable to extract), or move to production.

We will be staying on top of what they are doing, but we are calling for the state government to block any further permits for fossil fuel development in and around the Otways.

PEP 163

Extends over the entire area south of Geelong from Portarlington and St Leonards to just east of Winchelsea and extends down as far south as Airey's Inlet.  It does not involve "fracture stimulation" or fraccing.

PEP 169

Extends from the mouth of the Gellibrand River to east of Bay of Islands coastal park north through Timboon up to Cobden.  Sometime between April 2013 and April 2014 fraccing is permitted under this exploration licence.

Getting active

If you are concerned about the development of Tight Gas in Victoria, please get in touch: [email protected]