BHP Petroleum, fully committed to Western Australia

BHP's Griffin Venture FPSO.

BHP Petroleum has only recently begun the move of all its operations except corporate administration from Melbourne to Perth in response to the tremendous surge in WA petroleum activity and the decline of the Bass Straits. The company is one of the world's major exploration and production operators, with oil and gas holdings not only in Australia, but in the US Gulf of Mexico, Vietnam, the North Sea, West Africa, and the Caspian Sea. And BHP's role in the exploration and development of Western Australia's continental shelf is increasing rapidly as the company establishes joint ventures with other operators in projects here and undertakes ever-larger projects on its own.

Garry Woodhouse, BHP's Exploration and Gas Marketing Manager for Western Australia, describes some of the company's major E&P activities in the following interview.

Exmouth Basin

"We have two extremely large permits, deepwater blocks, in the Exmouth Basin in which we are 50% partners with Mobil. We are drilling a well there in early March on Leyden, a deepwater well in 900-1000 meters of water, using the Pelerin jackup rig. It's probably going to be gassy, but we have a model that suggests it may also have at least some oil in it. It is a very large prospect.

"This isn't the first deepwater well in this area, though. From the late 1970s to early 1980s, there was a phase of quite a bit of deepwater drilling. Phillips drilled a number of wells out there. Esso drilled quite a number of wells and, in fact, made a big discovery called Scarborough. It was an Esso-BHP discovery, since we're partners with Esso in Scarborough. The Exmouth well will be the first deepwater well since that time.

"JNOC, which has been showing a lot of interest in Australia lately, is also exploring in the area. They are now running a seismic survey across an area that's farther north in the same deepwater trend. They don't actually do any exploration directly. Instead, they do it through Japanese companies such as Japex. I have a fairly vague idea, I'm okay.

"While we've got that deepwater rig here, we'll be drilling a second well, the Scarborough II. Esso is the operator, but we've been fairly actively pushing them to draw an appraisal well on Scarborough, and I'm pretty sure that's signed up now, so the Pelerin will be drilling that second well before it heads back to West Africa to do a big program.

"We have a number of permits in the Barrow Basin, but there's not really a lot due to happening there."

Carnarvon Basin

"In the Carnarvon Basin, about July or August of 1996, we are going to be drilling a well on Nimrod, in the WL155 permit. We will actually do the drilling, but it's really a Mobil-run project. We have an arrangement with them, where they have do all the technical work and put the prospect together, and we offer aid, actually up at the rig. That is the only operated well at this point that we have scheduled for 1996 in the Carnarvon Basin.

"We are, of course, a partner in the Northwest Shelf, where there is a fairly significant drilling program taking place now through 1997 using the Sedco 702.

"To accommodate all the new gas reserves that are to come onstream in the next few years, the Northwest Shelf Gas Project is now talking about adding a fourth and fifth train to the existing three-train LNG facility, larger trains than the existing trains, and Shell, a member of both the Northwest Shelf Project and the Gorgon consortia, has stated that their preference is to bring Gorgon in and work it into the same project. On the other hand, Chevron's Vice President Dennis Bonney has quite openly and publicly said that the Gorgon project stands alone as a greenfields project. As an outside observer, there will be some decisions forthcoming soon, hopefully, by the end of the first half of 1996."

Terrace Talk

Perth is not only the capital of Western Australia, but the oil and gas capital of the region. As it happens, almost all the important companies involved in WA's petroleum industry have their offices on St. George's Terrace, Perth's main street. Thus industry gossip has come to be called "Terrace talk". A current example has to do with the present controversy over whether Greater Gorgon will be produced separately or be tied into the Northwest Shelf Gas Project, for it seems there is a newly discovered field, Perseus, lying between the Goodwyn and North Rankin Fields, and, they say, it alone could drive an additional LNG train or two.

When Woodhouse was asked about that possibility, he replied, "Although BHP is a partner in Perseus, because of my role as both exploration and gas marketing manager, I'm not privy to a lot of the information BHP in Melbourne has. I work on some things here that are BHP-operated that actually compete with the Northwest Shelf gas in the domestic market, so I just have to be a bit careful about what information I access. The suggestion is, however, that Perseus is quite large, a number of Tcf of gas, so I think the Northwest Shelf partners are at least trying to create the impression that even if Gorgon doesn't come with them, that they have enough to do it themselves. Whether that's true or not is yet to be seen. There's a rig up on Perseus right now carrying out a drilling program to try to prove out the field, so it will be a year and a half or more before we really know."

Browse Basin

"We also have a permit in Browse, the WA239, Yappie prospect, on which we drilled a couple of wells, but we didn't test them, despite their having some hydrocarbon indications. These permits are really basin margins, so they're getting close to the basin margins. Scott Reef's a bit farther out into the realm on the shelf edge, in quite a few hundred meters of water. BHP has a small interest in that permit. There are supposedly quite large deposits there, some say in the 20-plus Tcf range for the whole Brecknock-Scott Reef complex. Whatever it is, it's a pretty sizable piece of gas there. But obviously, there are problems with the reef that need to be sorted out. I mean, there is actually a coral reef there, and the water's deepish, and you're a fair way from the post. But it's down the road a ways, nothing to consider today.

"The Browse Basin, on the other hand, is certainly of some interest to us now. Haven't had enough indication yet that would tell us we want to walk away from it, so we're going to keep working that area a bit. The Browse has always been a bit of an enigma. I mean, way back in the late 1970s, there were some interesting hydrocarbon indications there with wells like Caswell and Brewster, and I think Woodside actually recovered oil out of some of those Caswell wells, but no one's ever really been able to crack it, and it hasn't had much activity for quiet a long time now."

Timor Sea

"The Timor Sea, which on a map appears to be in Western Australia, is administered by the Northern Territories, so it's called the Area of Ashmore and Cartier. We're out permitting the area of the Sea that comes under the jurisdiction of the Western Australian Department of Minerals and Energy; they're called WA permits. The permits in Ashmore and Cartier are called AC permits. We have three producing facilities in that area: Jabiru, Challis, and Skua. It's pretty well known now that we're trying to sell off those facilities as a package. There's still oil there, but now they're diminishing reserves, they're getting towards the end of their life, and BHP's strategy is that probably a smaller company with less overhead could make it a more viable proposition than we can, and that we should spend our funds on other things. Thus, the AC permit area of the Timor Sea is diminishing presently for us, with the exception of the very northern one, AC/P8, which is where the 300-million bbl Laminaria/Corallina is. Woodside is the operator, but BHP is a 25% equity holder."

WA94-10

Since this interview, BHP Petroleum's A$143.2 million, 11-well/seismic program bid won the most prized Timor Sea exploration permit in Australia's hottest oil province, WA94-10, now known as WA260-P, which lies between the Zone of Cooperation's oil and gas fields (Undan/Bayu, Elang/Kakatua) and those in the Laminaria/Corallina in WA-administered AC/P8 permit. Set for a $4 billion development program, it was at the center of a dramatic controversy due to the hot competition between BHP and its partners in AC/P8, Woodside and Shell. This because the region already contains four big oil finds, up to 40% of the Laminaria structure is believed to lie within the permit, and a wide array of other prime drilling targets are considered likely as well.

Before the award was made, Woodhouse noted that the local Lipscomb Report had revealed much of the details of the competition for 94-10. "It appears that the bidding was extremely competitive, probably more competitive than any other round that's occurred in Australia. According to Lipscomb, BHP bid 11 wells, Woodside-Shell bid eight wells, and the Japanese bid a significant number as well, very interesting because they haven't actually bid in their own right before. When the Lipscomb information got out, and it appeared BHP would get the permit, Woodside-Shell challenged what appeared to be the decision, even though there had been no official decision made on it yet.

"What's actually happened, it appears, is that Shell and Woodside had a substantial amount of 3D seismic in their bid along with the eight wells, 1,500 sq km, according to Lipscomb, and their thinking was that that seismic offsets the additional three wells that BHP had bid. That's never been a criteria for awarding of permits in this country."

Because of the controversy, the Canberra government delayed the award until amendments could be made to the applicable legislation closing a loophole under which permit holders could surrender their leases without completing their dry hole work program commitments in the first three years of the permit. In addition, the federal government began a review of the Petroleum Act of 1967 that is expected to lend weight to evolving technologies such as 3D seismic in the work program bidding system.

Federal Minister for Resources David Beddall said, "BHP Petroleum's winning work program is one of the most aggressive programs proposed by an exploration company in the last 20 years. This reflects both the company's assessment of the potential of the area and that the government policies to attract exploration investment are working."

Woodhouse said, "We're going to be pretty busy."

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