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AWE, Origin Make Big Gas Find in Western Australia

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AWE and Origin's Waitsia gas discovery is about 215 miles north of Perth, Western Australia. Pictured, the Pearce Air Base in Bullsbrook, about 20 miles north of Perth.

PERTH, Australia— AWE Ltd. said it may have made the largest onshore natural-gas discovery in Western Australia for 50 years.

 

The Waitsia field could contain more than 1 trillion cubic feet of natural gas, AWE said Thursday, following an initial analysis of a recently drilled well. AWE's shares closed 14% higher in Sydney, while those of partner Origin Energy Ltd. ORG.AU -2.04% rose less than 1%.

 

Australia has long been a hot spot for oil and gas exploration, and international companies including Corp. CVX -1.41%and Royal Dutch Shell RDSA.LN +0.23% PLC are investing billions of dollars to build export facilities.

 

But interest has been flagging recently, especially offshore where drilling costs can be high. The Australian Petroleum Production & Exploration Association in May said that the number of offshore wells drilled in Australia has fallen by more than two-thirds since 2003, while the cost has increased fivefold.

 

AWE's discovery was about 350 kilometers, or roughly 215 miles, north of Perth, the capital of Western Australia. It came a month after U.S.-based Apache Corp.APA -1.62% announced what would be one of Australia's largest oil discoveries in decades: as much as 300 million barrels of crude off Western Australia's coast.

 

Most of Western Australia's oil and gas output is shipped to Asia where it is processed. But there also is robust demand for piped natural gas within Western Australia to power mining and mineral-processing projects. AWE indicated that if favored supplying Waitsia gas to that market.

 

AWE said the Waitsia field, close to the shallower and smaller Senecio field, contains a gross contingent gas resource of between 65 billion cubic feet and 1.17 trillion cubic feet. The wide range was the result of the limited data available. AWE said further testing was expected for later this year and that its best estimate was that the field contains 290 billion cubic feet of natural gas.

 

The gas in Waitsia could be produced relatively quickly using existing infrastructure just 7 kilometers from the well, said AWE Managing Director Bruce Clement. "AWE believes the Senecio/Waitsia discovery could represent the largest onshore conventional gas discovery in Western Australia since the Dongara gas field was discovered in the 1960s," he said. 

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