Beach Energy has commenced preparations for drilling a conventional onshore gas exploration well in the Penola Trough, Otway Basin in South Australia.

Beach will be supported by the South Australian Government through the Plan for Accelerating Exploration (“PACE”) gas grant scheme, which aims to bring new gas to market within three years.

Under the terms of the PACE grant, if a discovery is deemed to be commercial, Beach will enter bilateral negotiations with prospective South Australian customers for supply of gas from Haselgrove-3 at prevailing market terms. The PACE grant remains subject to formal documentation being agreed.

The onshore Otway Basin in South Australia is a proven gas province close to existing infrastructure and pipeline networks. The region has produced approximately 70 Bcf of raw gas and has supported local industry. Beach has operated in the region for over 50 years and most recently undertook exploration drilling in 2014, which identified prospectivity in the Sawpit Sandstone Member beneath previously productive reservoirs.

Haselgrove-3 will be drilled in PPL 62 (Beach 100%) close to Beach’s Katnook gas processing facility and pipeline network, and the SEA Gas transmission system. The well will target conventional gas and gas liquids in the Sawpit Sandstone Member. Haselgrove-3 will not be fractured stimulated. Depending on the scope of well design and evaluation program, the $6 million PACE grant is expected to cover 40-50% of the estimated cost to drill Haselgrove-3. Drilling in Q1 FY18 is expected. If successful, Beach’s Penola Trough acreage has additional follow-up exploration prospects to drill which could supply material new gas to the market.

Beach CEO Matt Kay said, “We are pleased to once again be exploring for gas in the onshore Otway Basin in South Australia. The region is well known to Beach and we are confident that in a success case, it can supply new gas to the market. We also acknowledge the support provided by the South Australian Government through its PACE gas grant scheme. Haselgrove-3 is a conventional gas well that will not be fracture stimulated. Beach will undertake extensive community and stakeholder consultation throughout the planning, drilling and post completion phases of this drilling activity.”