Category Archives: Australia

Australia, officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania and numerous smaller islands in the Indian and Pacific Oceans.

Australia: Shell Completes Tortilla Survey

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Octanex has been advised by Shell Development (Australia) Pty Ltd (Shell) that it has completed acquisition of the new Tortilla 2D seismic survey in the WA-385-P permit.

The Tortilla survey is a relatively small 783 km 2D marine seismic survey that fulfils the final work commitment for the WA-385-P permit in the current term. It was acquired off the North West Cape of Western Australia, largely within the area of the WA-385-P permit.

The survey also acquired ‘tie lines’ between the planned location for the Palta-1 well (to be drilled in the WA-384-P permit to the north) and previously drilled wells Herdsman-1 and Pendock-1A to the south and Falcone-1A to the north-east.

The acquisition of the Tortilla 2D survey was timed to avoid the humpback whale migration and took place over the last 10 days of March. As part of a range of management measures, Shell elected that the seismic survey would not come within a 10 km buffer zone to the outer boundary of the Ningaloo World Heritage Area.

Shell has committed to drill the Palta-1 exploration well in the WA-384-P permit and has received environmental approval for the drilling operations. The WA-384-P permit is adjacent to WA-385-P where the Tortilla 2D seismic survey was acquired.

Shell has advised that drilling operations on Palta-1 are being planned for Q3 2012, subject to their receiving all required regulatory approvals. The well is to be drilled in water depths of approximately 1350m and to a total depth of 5325m – 5675m. The Octanex Group originally held 100% of the WA-384-P, WA-385-P and WA-394-P permits that are located in the southern Exmouth Sub-basin.

In 2008,  Octanex concluded an agreement with Shell for the disposition of a 100% working interest in each of the three permits. Octanex holds residual rights in each of the permits in the form of discovery payments and a 1% royalty over any production from the permits, as well as rights of re- conveyance.

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INPEX Orders USD 2 bln FPSO from DSME (South Korea)

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The second largest shipbuilder in the world, Daewoo Shipbuilding and Marine Engineering, Co, announces that it has received an order to construct a giant Floating Production Storage and Offloading vessel (FPSO).

The order comes from a Japanese oil giant, INPEX and is a part of the company’s Ichthys project, offshore Australia.

Daewoo made the announcement on the Korea Exchange, saying that the estimated worth of the project is $2 billion.

The FPSO will serve for offshore storage and export of condensate from the Ichthys field. The condensate will be transferred from the CPF to the FPSO and, further, it will be exported from the FPSO via a floating loading hose to offtake tankers.

The vessel will also treat and dispose of produced water. It will be located approximately 2 km from the Central Processing Facilitiy and will contain liquid (condensate and water) treatment facilities, living quarters and associated utilities.

South Korea’s shipbuilders have benefited greatly from the INPEX’s Ichthys project. Samsung Heavy Industries Co Ltd has recently received a $2.71 billion order for the construction of an offshore central processing facility (CPF) for the Ichthys project.

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Worst oil crisis could lie just ahead

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David Uren, Senior Economics Correspondent
From: The Australian
March 05, 2012 12:00AM

THE threat of an Israeli attack on Iran’s nuclear facilities has pushed world oil prices up by 15 per cent in the past month and raised fears that the fissile geopolitics of the Middle East might once again spell global economic havoc.

Israel believes Iran’s nuclear program is approaching a point of no return beyond which it would be impossible to prevent it developing nuclear weapons.

US President Barack Obama is expected to press Israeli Prime Minister Benjamin Netanyahu to defer action in talks in Washington today, to give time for sanctions to have full effect.

Facing an election in November and enjoying the first rays of economic sunshine since the 2008 global financial crisis, Obama does not need a Middle East war and soaring oil prices.

However, there is a strong push in Israel for military action.

“If we do not stop Iran now, later on it will be impossible,” Deputy Foreign Minister Danny Ayalon says.

Israel, which is understood to have its own nuclear weapons, sees a nuclear-armed Iran as an existential threat.

Saudi Arabia has indicated it would seek nuclear capability if Iran achieved it, adding further uncertainty to the stability of the world’s richest oil region.

The next three months are the most likely time for an attack as Iranian skies are clearest during the northern spring.

Iran has declared it will close the Strait of Hormuz as a first point of retaliation for any Israeli raid.

The strait is the seaway through which the oil of Saudi Arabia, Iraq, Kuwait, Iran and the United Arab Emirates is shipped.

Giant oil tankers carrying 18 million barrels of oil every day travel down the 10km-wide outbound shipping channel. This represents a quarter of the world’s oil supply and 40 per cent of seaborne oil trade.

If Iran could block the strait, it would represent a greater disruption to the world’s supplies than those that followed the 1973 oil embargo after the Yom Kippur war, the 1978 Iranian revolution, the 1980 Iraq-Iran conflict or the 1990 Iraqi invasion of Kuwait.

The International Monetary Fund has warned that the world is ill-prepared for a new oil crisis. In a paper prepared for last weekend’s G20 finance ministers’ meeting in Mexico and released on Friday, the IMF said developed countries had run down their emergency stocks while spare capacity in the OPEC countries was no more than average.

“A halt of Iran’s exports to OECD economies without offset from other sources could trigger an initial oil price increase of around 20-30 per cent,” the fund said. “A sustained blockade of the Strait of Hormuz would lead to a much stronger and unprecedented disruption of global oil supply.”

The Australian government is expressing confidence that a crisis could be managed; however, the scale of the turmoil that would flow from a Hormuz Strait closure would far exceed the government’s contingency planning.

The shock from soaring oil prices would also undermine the emerging hopes for a global economic recovery, damaging consumer and business confidence and depressing the terms of trade for oil-importing nations.

Resources Minister Martin Ferguson told The Australian that any reduction of oil throughput in the Strait of Hormuz would inevitably affect global supply.

“The possible impact on Australia will depend on a range of factors, including the length of disruption.”

He said the national energy security assessment completed last year had established that the security of Australia’s supplies of liquid fuels was “robust, with resilience enabling the market to adjust to meet demand in the event of temporary global shocks”.

However, the Australian government is as politically exposed to a new oil crisis as is the Obama administration. Already, the rising oil price is feeding the Coalition’s argument that Australia can ill afford to be introducing carbon taxes.

It will put increasing pressure on the cost of living.

If rising prices turn into a full-blown oil crisis over the next few months, the case for abandoning the introduction of the July 1 start-up for the carbon tax would become overwhelming.

Australia is far more vulnerable to an oil crisis than the level of direct imports from the Middle East would suggest.

Australia’s oil refineries, which still supply 70 per cent of domestic petroleum products, depend on the Middle East for barely 15 per cent of their crude oil supplies.

Domestic oil wells, mostly in Bass Strait, supply 20 per cent, while the balance comes from more than 20 nations including Malaysia, Indonesia, Papua New Guinea, Nigeria and New Zealand.

However, Australia also imports 30 per cent of its refined petroleum products, mostly from Singapore, which depends on the Middle East for more than 80 per cent of its supplies.

The Australian government conducted a review of its energy security late last year. The consulting firm ACIL Tasman modelled a supply disruption in which Singapore’s refineries were out of action for 30 days, depriving the region of 1.4 million barrels a day of production.

This would be similar to the effects of Hurricanes Katrina and Rita, which knocked out Gulf of Mexico oil production and US oil refining in 2005.

One of the study’s authors, Alan Smart, says the shortfall pushed up prices but this was sufficient to close the gap, with demand falling and new supplies becoming available.

“When the price spiked, the market responded very quickly with the gap filled within six days.”

The study concluded that the same could be expected were Australia to lose access to Singapore supplies, with spare capacity elsewhere in Asia quickly brought onstream.

The study found that although prices would rise by 18 per cent, there would be no interruption to economic activity in Australia.

Smart cautions, however, that a localised or regional supply problem such as a refinery shutdown, may be very different from the results of a war in the Middle East.

Singapore analyst with the oil research company Wood Mackenzie Sushant Gupta says that scenarios for a closure of the strait show a major impact on oil supplies throughout the Asian region.

“There is a high dependency on Middle East crude, not just in Singapore, with some economies taking more than 90 per cent of their crude from there.”

Gupta says the spare capacity in the Asian refining industry would be of no use to Australia if the refineries could not get access to crude supplies.

Moreover, countries throughout the region would be principally concerned to secure their own domestic supplies. Countries such as South Korea, which import petroleum but export refined products would divert more of their output to their own market.

Exports from countries such as Malaysia and Indonesia could also fall, at least as a short-term response.

Gupta says that in the event of shortages, Australia would suffer from being at the greatest distance from the regional refineries.

“All the Asian countries will be competing for the same barrels of produce from Singapore. The premium on the products will increase and the countries closest physically to Singapore will have the advantage due to freight.”

Gupta said there would be no additional supplies coming forward to meet shortfalls from Singapore, so it would be up to the market, with a spike in prices, to reduce demand.

So, although Australia currently draws the bulk of its supplies from non-Middle East supplies, the reality is that it is self-sufficient for only 20 per cent of supplies, and the market’s ability to supply the rest would be tested by an extended blockade in the Gulf.

An immediate response would be the drawdown of emergency supplies kept by all nations that are members of the International Energy Agency.

The IEA was established among oil importing countries in the wake of the 1973 OPEC oil embargo and requires all members to keep a minimum of 90 days’ supplies.

In Australia’s case, the reserves are held by the major oil companies as part of their normal commercial operations. The steady slide in Australia’s domestic oil supply has meant that Australia’s reserves are falling short of the requirement, currently standing at 88 days.

ACIL-Tasman warns that the shortfall is likely to increase over coming years; however, it is not enough to make a meaningful difference to Australia’s ability to withstand a crisis.

Ferguson retains sweeping powers under the Liquid Fuels Emergency Act to order the oil companies to give priority to essential fuel users in the event that the nation were confronted with physical fuel shortages.

It is not certain that Iran would succeed in an effort to block the strait, despite the total width of the waterway narrowing to 40km.

Many tankers were sunk during the Iran-Iraq war in the early 1980s; however, shipping technology has greatly advanced since then.

Although modern ships ostensibly make a much larger target, carrying as much as two million barrels of oil each, they are divided into sealed compartments with double-hulls and are much harder to stop or sink, even than warships.

US analysis finds that an attack on one of these vessels by three anti-ship cruise missiles would have only a 12 per cent chance of stopping it.

The same research project found Iran would have to sow a minefield with more than 1000 advanced mines, a task that would take several months, to disrupt shipping, and that would succeed in disabling only half a dozen ships.

The head of the US joint chiefs of staff, General Martin Dempsey, has said Iran would have the capacity to block the strait, but only for a short period.

“We’ve invested in capabilities to ensure that if that happens, we can defeat that.”

The US Fifth Fleet, stationed on the other side of the Persian Gulf in Bahrain, including more than 20 ships including aircraft carriers, could overwhelm the sort of “small suicide boat” attacks which the US believes Iran is planning and provides a credible support to tanker fleet.

American oil researcher Amy Myers Jaffe says it would be difficult for Iran to stop the flow of oil from the Arabian Gulf for long, if at all.

What is beyond doubt, however, is that the moment Israeli aircraft start bombing Iran, the oil price will jump. It has already risen from about $US105 a barrel to $US125 since the start of the year.

The impact on Australia has been diluted by the strength of our currency, which means wholesale petrol prices have risen by only 5.5 per cent this year, but further rises are in prospect.

An analysis by Barclays Capital suggests the oil price would rise to $US150 to $US200 a barrel in the event of an attack; however, estimates are imprecise.

As well as the loss of supply, there would be additional demand from buyers seeking precautionary stocks.

Westpac’s head of international economics, Huw McKay says the world economy remains vulnerable to oil price spikes and adds this was shown in the first half of last year when the Arab Spring pushed oil prices higher.

“That put a spanner in the works for the United States economy at a time when it had finished calendar 2010 with a bit of an upswing. When it ran into the high oil prices and then the Japanese tsunami, the US had a very underwhelming first half year.”

Mr McKay says the situation is similar, with consumers beginning to show a revival in demand. “What the US consumer doesn’t need is a fuel tax hitting them.”

The jump in petrol prices both damages consumer spending and causes an exodus from US motor vehicle industry.

Higher oil prices will also damage the economies of Asia. In several Asian economies, including India and Indonesia, government subsidies to petrol means that rising fuel prices results in a loss of control over the budget.

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Australia: Tap Taps into Tallaganda

Australia: Tap Taps into Tallaganda| Offshore Energy Today

Tap Oil Limited (Tap) advises that at 0900 hours (AWST) today the Atwood Eagle semi-submersible drilling rig commenced drilling the Tallaganda-1 exploration well in the WA-351-P permit.

The Tallaganda-1 prospect straddles both the WA-351-P and WA-335-P permits in the Carnarvon Basin, offshore Western Australia. The well will target 0.8 to 1.3 Tcf (mean to P10) of gas within WA-351-P (Tap estimate).

The prospect will test the gas potential of sandstones in the prolific Triassic age, Mungaroo Formation, in a well defined horst block as imaged by high quality modern 3D seismic data. This is the primary play type of the North West Shelf.

The well will be drilled as a vertical well in a water depth of 1,141 m and is expected to take 37 days (trouble free) to drill with a projected total depth of 4,250 m. Weekly updates will be provided on Wednesdays during drilling operations.

Tap’s cost for the well will be carried up to a cap of $10 million following Tap’s farmout of 25% of its participating interest in the permit to BHP Billiton Petroleum (North West Shelf) Pty Ltd in 2011.

Tap’s Managing Director/CEO, Mr Troy Hayden, said:

 “We are pleased to have commenced the Tallaganda-1 well which has the potential to deliver a resource multiple times larger than Tap’s current 2P reserves.  Success at Tallaganda-1 will also give greater certainty as to the prospectivity of the Triassic potential on the permit.”

Background

The Operator completed a detailed assessment of the plays, prospects and leads in the permit in 2010 including the 3D seismic acquired in 2008. Further leads and prospects have been defined in the Triassic Mungaroo Formation which Tap has assessed as a 2-3 Tcf combined speculative resource on block.

Additional leads have been identified in WA-351-P in the Jurassic and Early Cretaceous, both of which are productive elsewhere in the Carnarvon Basin. Current indications are that this shallower potential is larger, but higher risk, than the Triassic in this permit. Further work will be done on these objectives.

 WA-351-P Joint Venture Participants

BHP Billiton Petroleum Pty Ltd (Operator)

BHP Billiton Petroleum (Northwest Shelf) Pty Ltd 55%

Apache Northwest Pty Ltd 25%

Tap (Shelfal) Pty Ltd 20%

Australia: Tap Taps into Tallaganda| Offshore Energy Today.

Australia: Shore ASCO to Build Darwin Marine Supply Base

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ShoreASCO Consortium, which includes Asco Holdings, Macmahon Contractors and Capella Capital has been awarded a contract to design and construct the world-class Darwin Marine Supply Base, worth approximately $110 million.

Macmahon Contractors will construct the base which will include three marine berths with water, fuel, chemical and drilling mud connections, hard stand and lay down areas, warehousing, waste management facility, storage capacity for drilling muds, chemicals, water and fuel, office space and associated facilities.

Chief Executive Officer of Macmahon, Nick Bowen, said the project was a fantastic opportunity for Macmahon and continues the Company’s delivery of major infrastructure in the Northern Territory. “The supply base will bolster Darwin and the Territory’s reputation as the port of choice for servicing the needs of the offshore industry and is opportunity for Macmahon to establish another piece of major infrastructure, critical to supporting the Territory’s growth,”

The base will be operated by ShoreASCO for up to 20 years. Construction is expected to start in April 2012 and is expected to be complete by the end of 2013.

Paul Henderson, the current Chief Minister of the Northern Territory, Australia has welcomed the signing of the contract, saying the construction would begin in the coming months on the base which would cement Darwin’s position as a major oil and gas hub.

The Minister revealed that Oil & Gas majors have already shown interest in the Marine Supply Base: “Already major players have come on board to take advantage of our world class Marine Supply Base with ConocoPhillips to use if for their existing operations, INPEX confirming they will using  the base during their multi-billion gas development and Shell confirming they will use it to  service their floating LNG plant in the browse basin.”

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