WHL Energy (ASX: WHN) is fast tracking activity at its La Bella gas condensate field in the Otway Basin off Victoria, bringing forward acquisition of 3D seismic by almost 12 months and starting official farm out discussions.
Tenders have recently closed for the 811 square kilometre 3D seismic survey in VIC/P67, which is scheduled to be shot in April 2013, with contract award in about 90 days.
This was originally committed for the second year of exploration.
WHL managing director Steve Noske said the decision to fast track La Bella was made due to strong industry interest.
"From the time it was announced that we had successfully bid for VIC/P67 which includes La Bella, earlier this year, we have been approached by leading international and local companies about the potential to participate in this highly valuable block," he said.
"To this end, we are beginning the official farm-out discussions from next month, with a number of well-credentialed companies already signalling their interest in participating.
"We have also commenced the environmental approval process for the seismic acquisition and have begun stakeholder engagements."
A decision on the form a farm-out would take and how much equity WHL will retain will be finalised during the negotiation process.
Eastern Australia gas market
Rising gas prices in Eastern Australia provide an obvious market for La Bella gas.
Prices are expected to reach between A$6 and A$9 per gigajoule in the next couple of years, allowing gas explorers and producers the expectation that they will receive higher prices for their products, which in turn gives added incentive to explore for and develop new resources.
Indeed, WHL had previously said that La Bella, which holds Best Estimate (2C) Contingent Resources of 158 petajoules, could have conservative net present value of A$75 million at current gas prices of A$6 per gigajoule.
This value could more than double to over A$140 million if gas prices increase to A$8 per gigajoule.
"WHL Energy, its industry peers and Australian energy analysts have repeatedly stated that there is a strong likelihood of a significant gas shortage in the near to mid-term on the east coast of Australia," Noske said.
"An industry forum in Sydney was recently told by the chief executive of one of Australia's biggest gas producers that eastern States gas prices have already increased significantly and are likely to at least double and possibly triple as demand grows and more and more gas is exported via LNG projects."
Besides La Bella, VIC/P67 contains several other gas prospects and leads.
These include the relatively low risk prospects present at Highlander and West La Bella which provide additional tie-back opportunities to a potential La Bella development.
Larger, higher risk potential leads include the Lowlander Leads, which offer additional significant upside potential.
VIC/P67 is also located close to existing infrastructure including the Santos operated Casino gas development, Origin's Otway gas project, the BHP Billiton (ASX: BHP) operated Minerva development and TRU Energy's Iona gas plant.
WHL had committed to a A$62.1 million primary work program to secure the permit.
This includes the reprocessing of 1000 kilometres of 2D seismic, acquiring and processing of 811 square kilometres of 3D seismic as well as 650 kilometres of 2D seismic, 2 exploration wells and geotechnical studies.
The decision to fast track La Bella on strong industry interest is a good indicator of the prospectivity of the field and other leads in VIC/P67.
Securing the right partner will allow WHL to quickly develop the asset in a positive market for gas.
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