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US heavyweight EOG bets on Beehive offshore Australia

© Shutterstock / lkproA rig at work offshore Australia
A rig at work offshore Australia

US-based EOG Resources will make its first foray in Australia after buying 100% stake in the high-risk Beehive prospect that could hold up to 1.4 billion barrels of oil equivalent (boe). Beehive is potentially the largest undrilled hydrocarbon prospect in Australia.

EOG, which plans to drill Beehive in the Bonaparte basin offshore Australia next year, is one of the biggest oil and gas producers in the US. It is double the size of Australia’s largest producer, Woodside Petroleum, with an enterprise value of $32 billion.

Australian junior Melbana Energy sold its WA-488-P permit, which holds the Beehive prospect, to the Fortune 500 company, for an immediate $7.5 million cash payment, plus additional future payments tied to certain milestones and eventual production.

“Beehive is a material, un-drilled opportunity in Northern Australia. The entrance of EOG into Australia is a shot in the arm for the country’s exploration industry, it speaks well of the opportunity as well as the regulatory and fiscal environment. With a well suggested for 2022, EOG are not waiting around and clearly believe the prospect is robust and does not require further study,” Simon Molyneux, managing director at Perth-based upstream consultancy Molyneux Advisors, told Energy Voice.

As part of the deal, EOG will get the 700 square kms of 3D seismic shot by Total and Santos in 2019, as well as a library of 2D seismic. Melbana has been seeking investors to pay for drilling the huge carbonate structure after Santos and Total pulled out leaving the junior with 100% ownership.

“Both Total and Santos had a good look, invested time and money and knocked Beehive back. Both companies are good technically and must be respected. It’s high risk and high reward. It is also out of the box. It’s different to anything found or looked for previously and is analogous with the Caspian Sea,” another geologist told Energy Voice.

“It’s nice to see a new operator coming in – they are onshore focussed; this looks like their only offshore asset. They have bought 100% so that’s interesting – they’ll need local expertise,” another industry executive told Energy Voice.

WA-488-P is located in the Petrel sub-basin between Eni’s producing Blacktip gas field and the undeveloped Turtle and Barnett oil discoveries. It has an area of 4,074 square km and lies in relatively shallow waters. Beehive has an independent best estimate prospective resource of 416 million boe.

The Beehive prospect is a Carboniferous age 180 square km isolated carbonate build up with 400 metres of mapped vertical relief, analogous to the giant Tengiz field in the Caspian basin. It is located in 40 metres water depth, is suitable for a jack up rig and lies within 75km of shore and developable by either FPSO or pipeline to existing infrastructure. This play type is new and undrilled in the Bonaparte basin with no wells having been drilled to this depth there, Melbana said previously.

EOG also agreed to make further contingent payments of $5 million, half of which will be paid when the company enters the final year of the exploration permit and commits to drilling another well and the other half to be paid when a production licence is granted.

Regarding potential production, EOG will pay Melbana $10 million for every 25 million boe produced from the permit area.

“This transaction allows Melbana to retain significant exposure to the upside of a potential Beehive discovery without being exposed to the costs of offshore appraisal and development, which can be expensive and challenging for a junior oil and gas company,” Melbana executive chairman Andrew Purcell said.

“The testing of this new and exciting play type in Australia, responsible for some of the world’s largest hydrocarbon discoveries, is what all the years of effort have been for and we are heartened that such an experienced and well-resourced company as EOG, known for being ahead of the curve when it comes to identifying new areas, will be responsible for the final stage of this journey,” added Purcell.

Melbana will retain full ownership of its adjacent permit areas, WA-544-P and NT/P87, that host the undeveloped Turtle and Barnett oil discoveries.

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