shaping the cooper basin's 21st century...

110817-01: Elinor Alexander Shaping the Cooper Basin's 21st century renaissance

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Shaping the Cooper Basin's 21st century

renaissance

The Department of Manufacturing, Innovation, Trade, Resources and Energy (DMITRE) SA

has been successfully using competitive acreage releases to manage highly prospective

Cooper Basin acreage since 1998. The expiry of long-term exploration licenses enabled the

most significant structured release of onshore Australian acreage in the industryʼs history—it

has generated:

• 32 petroleum exploration licences (PELs) from ~70,000 km2 acreage;

• $432 million in guaranteed work program bids;

• 70 new field discoveries;

• $107.6 million royalties and $1.4 billion sales; and,

• increased gas supply-side competition.

Cooper acreage turnover has also changed the makeup of Australiaʼs onshore exploration

industry from numerous company-making discoveries. Since 1998, 10 acreage releases have

been staged, enabled by the Petroleum Act 2000 (now the Petroleum and Geothermal Energy

Act 2000), conjunctive agreements with Native Title claimants, access to multiple-use

Innamincka and Strzelecki Regional Reserves, and transparent application and bid

assessment processes.

Despite delays, most recently due to flooding, all but three of the original PELs are in their

second term and relinquished acreage has been incorporated into subsequent releases. All

work-program variations have been kept above the second bid score (except one, where the

second ranked bidder was consulted and approved the change) preserving bidding system

integrity.

DMITRE is planning new Cooper Basin acreage releases while contemplating acreage

management options for emerging unconventional plays. Industry input to map the best

possible future for the SA Cooper Basin continues to be welcomed.

Regulatory framework

State and Commonwealth agencies are responsible for managing the communityʼs in-the-

ground minerals and energy resource assets. South Australiaʼs asset-management approach

aims to maximise the net public benefit derived from discovered and undiscovered mineral

and energy resources. DMITRE is the lead agency facilitating ecologically sustainable

petroleum exploration and development in SA. Its operations cover promotion of petroleum


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acreage opportunities through marketing and providing geoscientific data and information,

regulating the upstream petroleum industry, and optimising royalty-income streams.

DMITRE regulate onshore petroleum acreage through the Petroleum and Geothermal Energy

Act 2000, which established a formal legislative framework for competitive tenders (both work

program and cash bidding) and over-the-counter applications. Work-program bidding was

established to allocate all petroleum exploration tenements in producing basins (i.e. the

Cooper and Otway basins), which are gazetted competitive tender regions. Competitive

tenders were first applied to manage the expiry of PELs 5 and 6 across the Cooper Basin in

February 1999—one of the most significant staged releases of highly prospective Australian

onshore acreage.

The selection of winning bids is achieved by a scoring system that establishes a 'risked net

present value in well equivalents' as the basis to rank work program bids (Morton and

Alexander, 2002). The scoring system has been adapted for each Cooper and Otway basin

acreage release based on the density of existing exploration data, size of the block(s), and

the best technology to evaluate petroleum potential. For example, scores for new seismic

acquisition in a block that already has excellent seismic coverage and ready-to-drill prospects

would be lower relative to drilling in that bid round.

Alternatives to work program bidding include cash bidding and first-in-best-dressedʼ or over-

the-counter applications—the latter are accepted for frontier SA basins with limited

infrastructure, seismic, and drilling coverage; thus, with higher exploration uncertainties. Cash

bidding has not been used for offshore Australian permits since 1993 and was tried with a

work program component unsuccessfully in 2001 for small Cooper Basin blocks (former

Petroleum Production Licenses [PPLs]). The Federal Governmentʼs Energy Policy White

Paper (November 2011) reconsiders cash bidding for highly prospective offshore areas. The

Queensland Government introduced cash bidding in January 2012. APPEA have opposed

cash bidding because it perceives that money would be diverted from exploration to cash-

bidding auctions.

Cooper Basin bidding rounds

Work program bidding was used from the mid-1980s for releases in the Otway, Officer, and

Stansbury basins and for acreage relinquished by the Delhi-Santos JV (Arrowie, Arckaringa,

Pedirka and Simpson, Basins). These acreage releases provided an opportunity to test

acreage management and competitive-tender approaches for the expiry of PELs 5 and 6. Ten

rounds of work-program bidding have been conducted in the SA Cooper Basin since 1998

(Fig. 1).

http://www.ret.gov.au/energy/facts/white_paper/Pages/energy_white_paper.aspx


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Figure 1: Staged acreage releases in the Cooper Basin, 1998–2010.


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Table 1: Cooper Basin bidding results: expenditures are for winning bids.

Many operators have aggressively explored their licences and successful explorers have

invested in appraisal and development drilling and facilities (e.g. roads, pipelines, bridges).

Some operators have varied work programs down from their original bids; however, variations

have not been allowed to drop below the second bidderʼs score without their approval—this

has occurred only once in the basin. Another option is to substitute a drop of acreage

proportional to work not completed—some operators have used this option. The relinquished

acreage goes back into the mix for new releases, providing turnover and access by other

explorers.

The first three Cooper Basin bid rounds (CO98, CO99, and CO2000) were designed to offer a

range of play types from Eromanga Basin oil leads beyond the Cooper Basin limit, to oil and

gas plays in core areas. The 27 blocks in the first three bidding rounds opened up ~94% of

SA Cooper Basin exploration acreage. The CO2001 release was prompted by an explorerʼs

request after the Santos joint venture relinquished six small PPLs containing oil and gas

prospects. These single-prospect blocks were offered on the basis of cash bidding with a

work program (cash bids were to be refunded to unsuccessful bidders); however, no bids

were received.

Cash bidding is still not a preferred option for the Australian exploration industry; it may have

been a disincentive for the CO2001, but the blocks were small and uncertainties about land

access existed at that time. The CO2001 areas were re-released in 2002 as one block, purely

for work program bidding with no cash component, but again no bids were received. Their

small size and perceived reward may have again precluded bidding; in addition, the oil price

was low in 2001–2 (US$24–25/bbl [BP, 2011]). These blocks remained vacant until

relinquishments in surrounding PELs enabled incorporation into new release blocks.


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The region around Coongie Lakes was withheld until environmental requirements for

exploration access were resolved, then released as the CO2003 block. In 2004, relinquished

PPLs in the Nappamerri Trough were offered as the CO2004 release block with tight gas and

oil play trends; however, no bids were received. This block attracted multiple bids the

following year when re-released as CO2005 at the request of an explorer. This area is now

regarded as prime acreage for the Roseneath-Epsilon-Murteree shale gas play and a basin

centred gas play, which Beach Energy is presently exploring.

By 2008–9, mandated partial relinquishments were occurring in the original 27 blocks at the

end of the first five-year term. This newly vacant acreage was offered as the CO2009 and

CO2010 releases, both of which attracted multiple bids. The basin is again almost fully under

licence or application. DMITRE is now monitoring upcoming relinquishments with a view to

preparing new acreage releases in the basin (Fig. 2).


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Figure 2: Cooper Basin licenses, new entrant discoveries and upcoming acreage drops

(March 2012).

Conclusion

Most Cooper Basin exploration licenses are now in their second term and exploration activity

is ongoing; however, licence suspensions granted during the 2009–11 La Nina flooding have

delayed relinquishments in a few PELs. The integrity of the work-program bidding system is

paramount and is demonstrably being maintained. Work program bidding will continue to


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apply for future releases of Cooper Basin exploration acreage releases. DMITRE always

welcome industry input into acreage management in SA.

References

ALEXANDER, E.M. AND MORTON, J.G.G., 2001—Selecting the winning bid. APPEA Journal

39 (1), 297–321.

BP., 2011—Statistical Review of World Energy. Accessed 8 February 2012.

<http://www.bp.com/sectionbodycopy.do?categoryId=7500&contentId=7068481>.

http://www.bp.com/sectionbodycopy.do?categoryId=7500&contentId=7068481

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