Projects

Galilee Basin Project Summary Exoma holds five petroleum exploration permits (ATPs) in Queensland’s onshore Galilee Basin totalling approximately 27,000 sq km (Fig 1). Within this total area, there are approximately 12,500 sq km underlain by some 250m of Permian-aged coal measures at depths ranging from 600 to 1200m.  The coals average around 25m of potentially coal seam gas (CSG)-charged coal.   Exoma believes that, using a conservative range of gas content estimates, the coals  within the permits held by the company, could contain a resource of between 20 TCF and >50 TCF of CSG GIIP (Gas Initially In Place).  These coal measures are the same age, and a lateral continuation of the gas-rich Permian coal beds of the world class Bowen Basin, nearby to the east.  In addition, there could also be a shale-gas resource in the younger Toolebuc Shale, possibly up to 100 TCF of GIIP.  Even at the lower, conservative gas content levels for both CSG and shale-gas, this would indicate a total GIIP potential of some 40 TCF, which the company believes is more than enough to develop into a world scale LNG project, providing the gas can be extracted at commercial flow rates.  If the higher estimates are achieved then a resource of in excess of 150 TCF is possible.   The presence of these two gas resources is not in doubt; what remains to be demonstrated is whether the gas can be produced at commercial flow rates.   Exoma plans to focus primarily on the LNG export potential of both of its two world scale gas resources. At such an early stage in the exploration of the Galilee Basin, Exoma is able to give only broadly generalised resource estimates.  The 100TCF estimates for the Toolebuc assumes that the shales which are present across all permits except the eastern end of ATP 1008 and will have gas contents similar to the Antrim Shale.   Such resource estimates will be modified as drilling proceeds and reserves are evaluated.  What will be important will be the conversion of such regional broad based resources estimates into proven reserves, which can only be achieved by a successful drilling campaign.   Coal Seam Gas Summary   The broad outlines of the basin’s coal geology is evident from analysis of some 35,000km of 2D seismic, in and adjacent to the Exoma permits, and over 100 exploration wells (drilled mainly for conventional hydrocarbons). The coals crop out or sub-crop below thin Tertiary sediments along the eastern and northern margins of the basin and dip gently to the south and west to some 1600m in basin centres, but are faulted out (or were not deposited) over the Maneroo Platform.   Two CSG prone, coal-rich sequences, are identified, the Late Permian Betts Creek Beds,  and the Early Permian Aramac Coal Measures.  Together, they have an average of some 25m of net coal and a maximum of almost 40m.  However, as age dating is unable to clearly separate the two coal intervals, net coal figures quoted above are for the entire coal bearing interval.   There are only six CSG wells in the Galilee Basin with published gas content data (Rodney Creek 1, 2 & 7, Crossmore 2, Splitters Creek 1 and Aberfoyle 1).  Average gas contents from these wells are in the range of 4.5 m3/t to perhaps 6 m3/t. Exoma, in calculating potential or contingent GIIP has used the more conservative value of 4.0m3/t for calculating CSG GIIP estimates.   Four apparently distinct coal packages have been differentiated in and adjacent to Exoma’s permit areas:     1. The Rand - Rodney Creek group, characterised by multiple, Betts Creek seams.     2. The Crossmore – Aramac group, with thicker coals developed below a generally thinner Betts Creek sequence.     3. The Splitters Creek – Coreena group, which shares characteristics of both the previous sequences.     4. The Alpha Sequence – in eastern ATP 1008 – which has two separate coal packages still under review.   Isopachs of the net coal discovered in wells drilled in the basin are only valid where there are closely spaced wells, as in the Rodney Creek region; but elsewhere it is noted that most wells were drilled on structural highs in pursuit of conventional hydrocarbon targets.  Re-evaluation of the extensive seismic data indicates that wells such as Norris 1, Beryl 1, Bellara 1, Coreena 1 and Cairnhope 1, were drilled on the crests of structures where the net coal (or total Permian section) is thin, and that thicker coal can be seen off the flanks.   It is unlikely that the gas content within the shales and coals will be evenly distributed, so Exoma’s first exploration task will be to identify so called sweet spots where better than average gas contents, gas saturations and formation permeability may occur.   The initial drilling programmes will therefore focus on Permian CSG which is better understood but will include one or more shallow wells to evaluate the shale gas potential of the Cretaceous Toolebuc Shale.  The first three Permian wells (estimated to be approximately 950 -1100m deep) are planned to core and test the coals in ATP 1008, with the first well estimated to spud sometime in June 2010.  The locations have been chosen following the company’s extensive review of the available geological and engineering data and the appropriate pre-drill preparatory work has begun.  Follow-up drilling of 11 more cored wells in ATPs 991 and 996 will follow, subject to funding availability.  The shallow Toolebuc wells in ATP 999 will also core and test the shale-gas interval at depths between 300m and 900m.   Despite minimal CSG exploration work in the basin to date, there are already two Galilee Basin CSG pilot projects (at Rodney Creek & Glenaras) under development, both operated by AGL.  Also, a number of other companies had begun extensive drilling programs in the Galilee Basin but have had to put their rigs on standby following the heavy rains in Q1 2010.  Exoma holds the largest contiguous acreage in the Galilee Basin and is well placed to become the area’s market leader and is planning an extensive drilling program over the next three years.

Figure 1 – Location of Exoma Energy’s ATPs

Shale Gas Project Summary The Cretaceous Toolebuc Shale has the potential to generate much larger volumes of gas than even the Permian coals that are Exoma’s initial objective in the Galilee Basin. However, there is as yet, no significant shale gas play in Australia; it should be noted that in North America shale gas contributes 2/3rds of unconventional gas and CSG 1/3rd.  Exoma’s review of the Toolebuc suggests that has the potential to provide an enormous, long term reservoir of high quality gas in addition to Permian CSG. Exoma’s interest in this potential is based on an extensive review of shale gas deposits, primarily in North America.  These gas deposits are as variable in character as coal seam gas and need careful evaluation.  The Barnett Shale is one of the better known of this type of deposit but is not analogous to the Toolebuc.  The Barnett Shale is in fact a spent oil and gas source rock that has previously generated and expelled  large volumes of conventional oil and gas and still contains significant amounts of gas, all generated by thermogenic processes.  Closer analogues for the Toolebuc are the less glamorous Antrim and New Albany Shales, which owe their existence to two separate processes of non-thermogenic, low temperature, biogenic gas generation. The Toolebuc is a rich oil and gas source rock that has not been buried deeply enough to have reached the onset of oil generation - the so called ‘oil window’.  Instead the gas that is always seen when drilling through the shale, was probably generated shortly after burial by anaerobic bacteria which were buried with the sediments but which generally die off when formation temperatures rise above 80oC, well before the temperature reached at the top of the oil window.  Such shale gas is termed biogenic and is found, not only in shales, like the Antrim and New Albany in America, but also in coal seam gas such as the Walloons in the Surat Basin and, in some cases, the CSG in the Bowen Basin and elsewhere. Low temperature biogenic gas is the source of around 20% of all the world’s gas accumulations providing for example some 80% of the gas discovered in the Po Valley in Northern Italy, where 20+ TCF of primary biogenic gas is being produced from inter-bedded sandstone reservoirs. Two types of biogenic gas are recognised, primary and secondary. In primary biogenic gas the shale, beginning life as an organic rich clay in an oxygen poor sea, similar perhaps to the Black Sea today, is gradually covered by further sediments and slowly dewatered, converting slowly into an organic rich shale.  Bacteria in the organic material, buried along with the clay, converts the organic matter into gas, which is initially (as with coal) adsorbed onto the organic material (kerogen) from which it is generated; some of the gas also becomes trapped within the microporosity system found in shales. If sandstones and other reservoir rocks are present within or adjacent to the shale, the gas can migrate or escape from the shale, but where reservoirs are absent, the gas remains trapped in the shale and accumulates till the shale sinks below the so called biogenic floor of the basin and bacterial activity is terminated by increasing temperatures.  Thereafter the shale becomes more deeply buried and may enter the thermogenic zone, or oil window, where once more gas (and oil) is generated, this time solely by heat and pressure. The biogenic floor in any basin is dependent on temperature; it can be quite deep in low temperature basins such as the Po Valley, where it is found at around 1370m; or quite shallow.  The Toolebuc in ATP999 lies above a granitic basement with anomalously high heat flows, and it is possible that the shale is still within the biogenic kitchen and generating gas. The second type of biogenic shale gas occurs where meteoric or fresh water from the adjacent outcrop brings additional (and different) bacteria into the shales, giving rise to the slightly different process of secondary biogenic gas generation, as with the New Albany and Antrim Shales.  Such gas, like coal seam gas, tends to be composed of only methane, whereas primary generation can produce ethane, propane and butane as well.  Primary generation biogenic shale gas (as is believed to occur in the Toolebuc, will have a higher heating value than secondary biogenic gas or CSG. Coals generally have low porosity compared to shales, with the latter sometimes containing more gas than is adsorbed on the interstitial kerogen.  In the range of known shale gas types, the high temperature, high pressure Barnett Shale is at one extreme, with all of the gas produced to date coming from microporosity in the shale, and almost none from what is adsorbed on the kerogen.  The Antrim is at the other extreme with almost all the gas produced coming from desorption (or evaporation) from the kerogen. The Toolebuc has the potential to be both a primary biogenic shale gas play, particularly in ATP 999 & 1005, with a possibly significant amount of secondary biogenic gas occurring downdip from the outcrop, which runs north of Barcaldine, where fresh meteoric waters may have percolated into the shale. Typically, secondary biogenic shale gas systems contain water that is much younger than the enclosing shale, whereas water associated with primary generation gas tends to be of much smaller volume and be of similar age to the shales.  Potentially this much lower water content could make development of these deeper shales more economic.

Figure 2 – Toolebuc Sketch Map of Depth

The Toolebuc covers almost all of Exoma’s permits ranging in depth from outcrop to 850m (see Figure 2).  It is a uniform, high Gamma Ray, high TOC (9.5%avg), organic rich shale, ranging from 10 – 45m in thickness, and always has gas shows when drilled.   The shale lies between two aquitards (sedimentary zones within the earth that restrict the flow of groundwater from one aquifer to another), being isolated by several hundred metres of Allaru Mudstone from the very shallowest artesian aquifers in the Galilee Basin, and by a similar thickness of Wallumbilla Shale from the deeper, Jurassic aquifers such as the Hutton.  Any future development would, with standard drilling and completion practices should not affect the aquifers of the Great Artesian Basin. The in-house Exoma study of successful biogenic shale gas plays in North America, and the regional study of the Toolebuc, summarised above, suggest that the gas that is always noted on drilling though the shale, is likely to be of mostly primary biogenic origin, with a potential for secondary biogenic gas being developed down-dip from the outcrop/subcrop shown on the map.  It is also likely that a large proportion of these shales are currently within the optimal biogenic shale gas window. This view is based on thickness of the target interval, gas shows in wells, and the generally shallow depth window from which most production occurs in analogous basins.   The results of these ongoing studies will guide Exoma in selecting future drilling locations. The shale will be cored wherever feasible and subject to similar desorption and adsorption testing to CSG cores to measure the all important gas content. The significance of this somewhat unconventional play is that Exoma estimates that there could be a total shale gas resource of as much as 100 TCF of GIIP in all five permits. How much of this gas is recoverable at commercial rates is unknown, but evaluating this and converting the obvious gas resource into reserves, will be the prime focus of the company’s exploration program.