Australasia upstream senior analyst Daniel Toleman said that sometimes, exploration throws up a result that no one saw coming.
Prior to drilling, both WoodMac and Quadrant had viewed theDorado-1 well as one of the top gas wildcats to watch in the region in 2018. The aim had been to find 545 bcf of gas, but the actual outcome appears to be a large commercial oil find.
Toleman said most offshore operators had given up on finding liquids offshore Western Australia, the last discovery in the region holding more than 50 MMbbl dating back to 2003, and the last 100-MMbbl discovery to 1996.
For block partners Quadrant and Carnarvon finding oil makes development much easier, as oil has a lower-risk profile and does not require gas contracts or infrastructure, which means it is easier and faster to monetize.
Appraisal drilling will be needed to firm up the resource, but according to Toleman, a base case of 150 MMbbl for Dorado would be easily commercial.
Quadrant executive Fred Wehr has said that the potential upside is staggering, claiming that this was something he had never seen during his 35-year career.
But it also remains to be established whether the find is mainly light oil or so light that it is in fact a condensate, normally a natural liquid that ‘drops’ out of wet gas production.
Either way, very light oil is profitable and often commands a pricing premium to Brent. The downside, Toleman added, would be if it were a condensate with high volume of associated gas: then added capex would be needed for gas handling and perhaps re-injection/recycling.
But studies will follow on a development concept. An FPSO appears to be the most likely solution, Toleman said, being cheaper than building and installing a fixed platform, although drilling the wells, the subsea equipment, and buying or leasing an FPSO would still require significant upfront investment.
The find could also spark M&A activity for the partners and those with nearby acreage, or potentially a farm-in to Dorado by a major E&P company.
A medium-sized gas play in this remote location would most likely be uneconomic, because of the 75 tcf of undeveloped gas in neighboring, infrastructure-intensive basins. But even a 50-MMbl oil discovery should break even at $49/bbl, Toleman claimed, without the complexity of new export infrastructure or commercial arrangements.
Now WoodMac expects exploration in this area to revive: a key indicator should be the level of interest in nearby acreage releases W17-4 and W18-4, bidding on which is due to close in 4Q.