Armour Seeks Shale Gas in Australia's Northern Territory

CEO Armour Energy, Phil McNamara, told delegates at the Shale Gas World Australia 2011 conference in Adelaide about capitalizing on shale gas opportunities in the Northern Territory.

At the Stamford Plaza in Adelaide’s bustling CBD, McNamara first provided the audience with an introduction to Armour Energy. “We are a new company, formed early in 2010,” he said. “During that period of time we have acquired an area of tenements in the Northern Territory and Queensland.”

McNamara said they were an emerging shale gas business. “That’s our focus,” he said. “We currently have 11,500 square km of granted tenements and another 113,000 square km under tenement applications.

“We’ve got what we consider to be an accomplished management team with a track record of delivering value.”

McNamara said it was important to note they had an historic gas flow within one of their granted tenements. “That gas flow analysis from that shows that we have some real prospectivity for production of liquids and at this point we have a mean prospective unconventional resource estimate of 18.6 Tcf,” he said.

Regarding the company’s area of operations, McNamara said they had good proximity to markets and infrastructure, existing pipelines and existing highways to facilitate commercialization. “Our target area is sparsely populated and the understanding we have of shales, from previous drilling of shales in this area, is that they are dry and we won’t be facing issues of dealing with deep water underground.”

McNamara then showed a slide containing a 1979 photo of a gas flow, the flame set against the back-drop of the iconic Australian bush. He said the main attraction for the company in this region was this gas flow near Glyde River.

The slide detailed the gas flow as being from a 494m deep hole drilled in 1979, with the flow coming from the porous Coxco Dolomite – beneath the Barney Creek shale.

McNamara said the interesting thing was, there had been very few holes drilled through the Barney Creek shale into the Coxco Dolomite. “Nobody took any notice of this for 30-plus years,” he said. “There was a gas sample taken from the hole. It shows very low carbon dioxide.”

Showing a map of the NT and Queensland, McNamara said they considered this to be a new gas province in the north of Australia. “We’ve got exposure to the McArthur Basin, to the northern side of the Georgina Basin, and the Nicholson Basin into Queensland.” The Batten Trough sits to the north of the McArthur Basin.

He also showed a map of the Armour Energy tenements north and east of Tennant Creek, pushing up to the Gulf of Carpentaria to the north, and made the point that the first two tenements are in place. “We have a range of tenement negotiations to continue on Native Title Land and on Aboriginal Land Act Rights Land.”

McNamara displayed a slide detailing the company’s strategic position, described as low social impact. The key points of the slide pointed out tenements were located within land primarily used for livestock grazing, and acreage was set in a low population density area while still being accessible to production infrastructure.

Furthermore, the slide noted that drilling and fraccing activities would have a minimal impact on regional population centres, and finally, a proactive land management strategy was in place to develop strong relationships with stakeholders.

McNamara showed a photo of the company’s initial meeting with traditional owners of the land at Borroloola in October 2010.

“That relationship is being well developed with the Northern Land Council and traditional owners at Borroloola,” he said. “From August 2010 to June 2011 we completed Native Title agreements for the first two areas - the first two tenements.

“That was completed in a very quick time frame, much to the surprise of the NT Government. There had been a history of some conflict between the traditional owners in this area and mining companies in the region, however, we have managed to work our way past that and engage the key stakeholders in this region.”

McNamara also showed a slide depicting depth of targets within the Batten Trough. “We’ve got Barney Creek shale in the 500-1,000m range here, which gives us an oil potential, liquids potential, and the Barney Creek shale in the 1,000-2,000m depth range with small areas that are plus 2,000m.”

McNamara said the company saw great potential to continue with exploration further to the east and further assessment of the geology in the region.

An interesting comparison was then made with the shale gas situation in the US and what was happening in Australia. “We look at the situation with shale gas as being a repetition of the time lag that’s occurred between coal seam gas production in the US, into Australia, and the similar time lag between shale gas production in the US to the point that we are now at initial shale gas exploration in Australia,” he said.

McNamara also showed a slide demonstrating the characteristics of the Barney Creek shale compared favorably with the depth, maturity, total organic carbon, thickness and porosity gas producing US Barnett shales.

McNamara said there was existing infrastructure to support development. “That’s one of the plusses of the area that we are in,” he said. “We are not looking at huge capital investment to have to achieve that first production of shales. We are very clearly focused on winning the contract at McArthur River Mine and setting that up as the early cash flow, boot-strapping business for this company.

“So there is that existing pipeline from the McArthur River back to Darwin. Its 700km along that easement back to Darwin – the existing Conoco Phillips plant.”

McNamara also pointed out that the Carpentaria Highway gave very good access to the exploration area.

Reported by Simon Trayhorn