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AWE
27 October 2014
Inquiry into the Implications for Western Australia of Hydraulic Fracturing for Unconventional Gas
Good afternoon, my name is Bruce Clement and I am the Managing Director of AWE Limited. I am
accompanied today by my colleague Mark Fabian who is AWE's Subsurface Manager in Western
Australia.
Firstly, I would like to thank the Chairman and the Committee members for extending the
invitation to AWE Limited to address you today.
AWE welcomes the opportunity to continue its contribution to the Inquiry into Hydraulic Fracturing
and to progress the constructive dialogue on both the merits and perceived risks of hydraulic
fracturing in Western Australia, particularly given increased public interest in the matter.
No matter what the Committee's eventual recommendations are, the mere fact that we are
sitting here today in Dongara talking openly about hydraulic fracture stimulation in a public
setting helps to contribute to both a greater understanding of the process and engagement with
the community.
Rather than repeating general hydraulic fracturing information, today I will provide the committee
with relevant information about AWE's own operations in the North Perth Basin.
AWE has been at the forefront of onshore oil and gas in Western Australia and we have
demonstrated on a number of occasions that hydraulic fracture stimulation of wells can be
achieved safely.
I will address four topics in this opening presentation.
1. A relatively brief overview of AWE and its Mid West Western Australian operations
2. AWE's experience of the regulatory environment in Western Australia
3. The Woodada Deep well case study that was the subject of our submission to this
committee
4. A snapshot of the Senecio-3 and Drover-1 wells, our two most recent wells drilled in the
Perth Basin
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I. AWE Overview
AWE is a leading ASX-listed Australian energy company focused on oil and gas exploration and
production.
The Company is a highly competent and capable operator and has extensive international
experience and expertise in upstream oil and gas operations in Australia, New Zealand,
Indonesia, China and the United States. These operations have included hydraulic fracture
stimulation of wells.
The Company's main producing assets currently deliver around five million barrels of oil
equivalent per year, making AWE one of the larger hydrocarbon producers in the ASX energy
index.
AWE and its predecessors have been investing and operating in the North Perth Basin for more
than 10 years and the company has developed a number of commercial oil and gas fields over
this time.
More than 200 wells have been drilled in the Perth Basin and AWE and its predecessor
companies have successfully drilled more than 80 of those wells. This point is worth highlighting
as it demonstrates our capability to drill and produce safely, and to protect the surrounding
environment.
In 2012, three gas wells were tested as part of AWE's North Perth Basin exploration program,
with eight separate zones in those wells hydraulically fracture stimulated.
The initial results have been promising, with fracture stimulations safely and successfully
completed in all zones.
We have worked closely with landowners, local communities and government regulators to
provide open and transparent communication on our exploration plans and our work program.
For example, last month we established a Community Reference Group for local Green Head and
Leeman residents because the views and concerns of residents in the local communities we
operate in are crucial to AWE.
AWE has been, and will continue to be, an active participant in the Mid West community for an
extended period of time. Part of our contribution to this community is the $5 million AWE spends
annually in the Mid West economy and community through wages, supply agreements with local
contractors and community partnerships. If AWE increases its operations this Mid West
investment will increase.
Some of our community partnerships include the Dongara Football Club, the Dongara Drive In,
the Eneabba Progress Association, the Green Head Men's Shed, the Green Head and Leeman
Bush Fire Brigades and the Eneabba Primary School.
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As a company, we have proven time and time again that we can drill and produce onshore
natural gas safely while creating employment, business opportunities and providing cost
effective, reliable and cleaner energy.
2. Regulatory standards
AWE believes that Western Australia has a robust regulatory framework in place to ensure both
drilling and hydraulic fracturing operations meet the highest safety and environmental standards.
As I mentioned, AWE has operations in Western Australia, Indonesia, New Zealand, China and the
United States which exposes the company to regulatory frameworks in these different
jurisdictions.
Our experience in Western Australia is that the regulatory processes and procedures are clear,
robust and transparent.
While at times, like all operators, we would prefer some faster decision making, we understand
and support that the Department of Mines and Petroleum, the EPA, the Department of Water,
and other regulatory bodies must undertake a rigorous assessment of the proposals placed
before them.
3. AWE's fracking submission
I will now move to AWE's submission to the inquiry.
In our submission we used our experiences at the Woodada Deep well in 2012 as a case study,
because unlike many submissions, we were able to use robust data monitoring obtained from
drilling and fracture stimulating a well in Western Australia.
The Woodada Deep case study highlights that as a Company, AWE is not just talking about what
may or may not happen during a hydraulic fracture operation, but what did happen and the
measurements obtained. We have hard data that proves our operations were safe and
environmentally sound.
The baseline studies of water and air quality when measured against post-hydraulic fracturing
results proved the safety of our operations
In addition, AWE also engaged a specialist company to assess the impact and extent of the
hydraulic fracture stimulation process using microseismicity. AWE was not compelled to collect
this data. We chose to collect it so we could improve our knowledge of the extent and direction of
fracture propagation and so that we could be absolutely confident that the induced fractures
were not extending beyond the target zone.
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All results were collected and independently analysed - which is an essential element of AWE's
commitment to openness, accountability and transparency.
You have the environmental monitoring results from our submission, but it is important to
highlight that the consultants we contracted concluded that comparison of the data against
baseline groundwater monitoring indicated that the hydraulic fracture stimulation operations
have had no discernible influence on groundwater conditions in the vicinity of the Woodada Deep
site.
The microseismicity results confirmed that no out of zone fracturing occurred.
4. AWE's future work program
In the coming year, AWE will be focussed on progressing two key projects in the North Perth
Basin; the Senecio/Waitsia field development and possibly the hydraulic fracture stimulation of
the Drover-1 well.
The Waitsia field represents an exciting new play for the Perth Basin with large upside potential.
The Senecio and Waitsia fields provide an early conventional production opportunity with
combined gross 20 Contingent Resources of 360 Bcf at present.
To put that figure into perspective, that is approximately the equivalent of Western Australia's
domestic gas consumption for a year. It is also the largest onshore gas discovery since the
Dongara Gas Field was discovered in the 1960's. Coincidentally, AWE continues to produce gas
from the Dongara Field today, albeit at small and declining production rates as the field nears the
end of its life.
The Senecio-3 well has been cased and suspended in preparation for conventional flow testing
late this year or early next year.
Due to the moderate to good reservoir quality observed during the drilling of Senecio-3, our
current view is that the Waitsia discovery is likely to be a conventional gas field .... however flow
testing and further appraisal wells are required to substantiate that view.
Contained within the Senecio/Waitsia acreage there is a significant unconventional play which is
li kely to be larger than the conventional play and could make a significant contribution to the
future energy supply in Western Australia.
If ultimately developed, it could reduce Western Australia's reliance on offshore gas and/or coal,
and could provide Western Australian industry and consumers with a new source of competitively
priced clean energy.
Also in June this year AWE drilled the Drover-1 vertical exploration well to a total depth of
approximately 2,400 metres. The well was aimed at gathering a comprehensive understanding of
the subsurface geology.
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AWE successfully intersected all target formations and obtained a series of core samples and log
data.
Drover-1 was drilled without any adverse health, safety or environmental incidents.
Gas readings from the formation were observed while drilling, although the significance of these
readings is currently being evaluated. Once the analysis of the core samples is complete, we will
be able to better inform the local community about our intentions for the next stage of
operations, which may potentially involve the use of hydraulic fracture stimulation.
While AWE has already received approval to hydraulically fracture the Drover-1 well, we have
made a commitment to continue to engage openly with the local community about those
operations should we decide to proceed with them. We have been very open about that process
and our willingness to engage from day one.
Community consultation and engagement in preparation for the Drover-1 well, as with all our MidWest operations, has been an extensive, two-way process with the local communities. We seek
feedback and respond promptly.
AWE has used a number of avenues for informing the community including mailing letters to
residents, meeting with local decision makers and the relevant Shires, and holding community
information sessions, which were advertised in the local papers as were summaries of the
information sessions afterwards..
In addition a local community reference group has now been formed to the aid of an independent
facilitator to lead discussion. This will provide AWE and local residents an additional conduit for
engagement with each other.
We are continually demonstrating our willingness to become an even more active member of the
community in the Mid West.
A number of State regulators have scrutinised our proposal to drill and conduct a trial hydraulic
fracture of Drover-1. That proposal was reviewed in various forms by the Department of Mines
and Petroleum, the Environmental Protection Authority, the Department of Water, the
Department of Environment and the Appeals Convenor .... and was ultimately approved.
I do have some further information on the Drover-1 aquifer protection also gas volumetrics for
the Senecio/Waitsia field.
However, I anticipate they might be the focus of some of your questions today, so in the interests
of time I will perhaps conclude my opening submission, and then if they're not asked and we do
have time, I could provide that information at the end of this submission.
Before I take your questions I would I would like to thank the Committee for implementing this
inquiry.
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As I said at the beginning, the fact that we are here today discussing hydraulic fracture
stimulation in a public setting has a positive role to play in contributing to both a greater
understanding of the process and engagement with the community.
As I mentioned earlier, AWE and its predecessors have successfully drilled more than 80 wells in
the Mid West of Western Australia and has safely hydraulic fracture stimulated three of those
wells.
We are absolutely confident in the capabilities of our company to continue to do that safely, and
to build on the $5 million a year we already spend in the local community as well as add to the
gas we supply every day to Western Australian households and businesses.
Thank you.
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Additional comments
i. Safety of aquifer
There has been some discussion in the media, among local residents and by a few vocal
opponents about the water bores in proximity to the Drover-1 well and I would like to encourage
the Committee members to seek clarification on any concerns you may have in relation to those
operations.
During the planning and approvals process our intended activities were reviewed by multiple
Government regulators and agencies, including the Department of Water.
We identified the Mt Peron water reserve as a risk during our environmental planning and using
the source-pathway-receptor model, we came to the conclusion that the well could be safely
drilled and fracture stimulated.
The Environmental Protection Authority and the Department of Water also reviewed those plans.
The Department of Water analysis of the risk is important. According to the Department of Water:
It was estimated that if any spill was not contained or remediated, it would take
hundreds of years, and up to 800 years, to travel the distance to Mt Peron bore field,
which is approximately 4km away. Flow direction of water at this superficial depth also
reduces the likelihood of any spill diffusion reaching the bore field abstraction area.
Obviously, if there was any at surface spillage, AWE would move quickly to clean up the
spill to prevent it from seeping into subsurface water.
The hydrogeological assessment by the Department of Water was that any risks from a
well failure to the deeper aquifer where the Mt Peron water is drawn from are extremely
low.
Water at this depth travels in a west - north westerly direction at a velocity that
decreases with depth and would take thousands of years, and up to 6000 years, to reach
the distance to the Mt Peron borefield. An assessment of the direction of groundwater
flow from the well location is that any spill particles would not necessarily reach the
drinking water source area.
In its summary the Department of Water concluded: Therefore the evaluation is the
drinking water source for the supply to consumers in Greenhead and Leeman is not at
risk from the Drover-01 exploration operations.
If we believed there was any risk to the water supply we would not drill or hydraulically fracture
the well.
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We are continuing to engage with the local community on this matter because it is important to
them and it is important to AWE.
I. Additional Waitsia volumetrics
During drilling operations at the Senecio well, elevated gas shows were observed and the
decision was made to deepen the well to 3,370 metres to appraise underlying secondary targets.
After the initial analysis of data from the Senecio-3 well, and the existing 3D seismic, AWE
estimates that the Kingia/High Cliff Sandstone intervals in the Waitsia Field have gross
Contingent Resources in the range from 65 billion cubic feet to 1170Bcf, with best estimate (2C)
of 290Bcf.
This makes up a substantial portion of the 360Bcf for Waitsia and Senecio I alluded to earlier.
Further evaluation and appraisal will be required to more accurately define the size of the
accumulation and the lateral extent of the conventional and tight gas bearing sands. It should be
noted that the Kingia/High Cliff Sandstone interval, which is the Waitsia formation, has not been
previously penetrated in this part of the basin and represents an exciting new play.
In addition, AWE is also evaluating the gas bearing intervals in the Irwin River Coal Measures and
Caryniginia Shale, which could provide substantial additional unconventional resources potential.
AWE estimates that the Irwin River Coal Measures has gross Prospective Resources in the range
from 114Bcf to 1497Bcf.
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