A new drilling contractor in WA’s onshore oil and gas sector has outlined plans to expand its fleet, with backing from a heavyweight US investor.
A new drilling contractor in WA's onshore oil and gas sector has outlined plans to expand its fleet, with backing from a heavyweight US investor.
When Advanced Energy Group signed a four-well drilling contract with Buru Energy last month, it marked the entry of a significant new player in the state’s oil and gas sector.
AEG expects to start work for Buru in the Canning Basin later in the year, and director Paul Tudor said the company had large growth plans.
“We plan to bring more rigs into the state,” Mr Tudor told Business News.
“Our next rig will be here in late 2014 or early 2015.”
AEG’s entry into the WA market is a major development, as the limited supply of specialist rigs has been one of the main constraints facing companies seeking to undertake onshore exploration programs.
One of AEG’s main competitors will be Perth company Enerdrill, which this year signed a contract with New Standard Energy.
New Standard had previously worked with Queensland-based MB Century, but cancelled the contract in February after encountering “safety and competency” issues.
The limited supply of rigs reflects the high costs involved – each drill rig used in onshore oil and gas exploration is a major investment, costing more than $20 million.
AEG, formerly known as Advanced Energy Services, was established by Advanced Well Technologies founder Cameron Manifold with the support of Mr Tudor, who has previous commercial experience at Iluka Resources and Western Power.
The rig is owned by NewGen Drilling, a subsidiary of MidAmerican Energy Holdings, but will be operated and maintained by AEG.
MidAmerican is part of legendary US investor Warren Buffet’s expansive Berkshire Hathaway group.
Mr Manifold believes his LOC-400 rig sets a new benchmark for the local market in regard to operational safety, reliability and efficiency.
“We invested significant time and effort finding the right rig for Western Australia,” Mr Manifold said.
Buru has also sung the praises of the rig, which has a depth capability of more than 5,000 metres.
Managing director Keiran Wulff said his company conducted an international expression of interest last year and attracted a good response.
It was looking for a rig with the right technical capabilities but also wanted a long-term commitment from its contractor.
“That’s why we decided to go with a WA start-up; it was a win-win,” Dr Wulff said.
Buru said the AEG rig had a smaller environmental footprint than rigs previously used in the Canning Basin.
It has a ‘rig up-rig down’ process that takes less than 30 per cent of the time of conventional rigs of equivalent depth capacity.
The rig is about to undertake its first drilling program at the Whicher Range gas field, south of Busselton, before starting work for Buru.
Both Mr Manifold, through private company Whicher Range Energy, and MidAmerican Energy Holdings, through its subsidiary CalEnergy Resources, have an interest in the Whicher Range gas field.
CalEnergy bought a 33 per cent stake in the field in 2011 and in March this year the joint venture agreed that it would become the operator.
The current drilling at Whicher Range is part of an appraisal program that builds upon five previouslt drilled exploration wells.
New Standard Energy said it spoke to potential new players in the WA market before signing with Enerdrill, which is backed by Argonut Capital boss Eddie Rigg.
Under the contract, Enerdrill will drill a vertical well at New Standard’s Merlinleigh gas project, inland from Carnarvon.
This was a change of tack for New Standard, which had primarily been focused on its Southern Canning project, inland from Broome.
Managing director Phil Thick explained last month that Enerdrill would not have been able to complete its initial drilling program before the onset of the wet season.
“We agreed with our JV partners that it would be best to defer drilling in the Canning Basin until after the wet, when we can then plan to drill a number of wells,” Mr Thick said.
New Standard is aiming to drill up to three wells in the Canning next year.
Mr Thick said New Standard had contracted Enerdrill’s refurbished Rig #3, which can drill to a depth of 5,200 metres and therefore was capable of drilling all of its wells.