31 July 2008
Annual Reserves Report 2008
Origin Energy Ltd (“Origin”) today announced that following its annual review of reserves across its Exploration and Production (E&P) interests, Proved and Probable (2P) reserves have increased by 66% from 3,471 petajoules equivalent (PJe) to 5,770 PJe. This includes a net increase in Coal Seam Gas (CSG) reserves for the year of 92% or 2,281 PJe to 4,751 PJe, and follows an 80% increase in 2P CSG reserves in the prior year.
Origin has also increased its Proved, Probable and Possible (3P) reserves of CSG over the year by 121% from 4,578 PJ to 10,138 PJ as certified by Netherland, Sewell & Associates, Inc (NSAI) at 30 June 2008.
Commenting on the reserves increase, Managing Director Mr Grant King said, “Origin’s long term focus on establishing an unparalleled resource base in Eastern Australia is now delivering significant value to shareholders. Today we have announced a 66% increase in our 2P reserves with the majority coming from our CSG tenements in Queensland. Origin will continue to develop this resource to service growing market demand in Eastern Australia, particularly for gas fired power generation.
“The scale of our 2P and 3P reserves position, combined with significant contingent resources also provides the opportunity to consider a CSG to LNG development. The company is currently engaged in discussions with a number of global energy companies to work with Origin to accelerate the monetisation of this CSG position” said Mr King.
A summary of the year on year change in reserves is provided in the following table, with greater detail provided in additional tables at the back of this release.
|Origin 2P Reserves by Region
30 Jun 07
30 Jun 07
30 Jun 08
|Other Onshore Australia||22||7||(8)||21|
|Offshore Basins Australia||499||2||(16)||485|
The reserves increase has been achieved mainly through the additions in Origin’s CSG tenements in Queensland. Origin has replaced production in the Cooper Basin this year, and further reserves have been added through the acquisition of producing assets from Swift Energy in New Zealand.
The increase in reserves does not take into account discoveries such as Trefoil in the Bass Basin, or Halladale and Blackwatch in the offshore Otway Basin. Technical evaluation of these discoveries is continuing.
The change in Origin’s CSG reserves and resources across the year is outlined below:
|Origin Equity Interest
CSG Reserves (PJ)1
30 Jun 07
30 Jun 08
|Proved and Probable (2P)||2,470||2,281||4,751||92%|
|Proved, Probable and Possible (3P)||4,578||5,560||10,138||121%|
|Origin Equity Interest
CSG Reserves (PJ)1
30 Jun 08
|Contingent Resources (2C)||15,869|
The internationally recognised petroleum consultant NSAI has prepared this assessment of Origin’s CSG reserves and resources based on technical, commercial and operational information provided by Origin, and its deep knowledge of CSG developments in Queensland. The commercial information includes a forward price scenario based on monetisation of the CSG through domestic markets including power generation opportunities, direct sales to end users and utilisation of Origin’s wholesale and retail channels to market. It does not include any sales to LNG developments or other export market channels.
Due to the extensive nature of the coal seams within Origin’s CSG tenement areas Origin has extended reporting of its CSG resource to include 3P reserves, Contingent Resources and Prospective Resources. A 3P reserves assessment represents a high-side estimate of the reserves recoverable under the prescribed technical, commercial and operational criteria provided. Due to the nature of CSG accumulations there is a higher probability of converting contingent resource to reserves, and of converting 3P reserves to 2P reserves than in conventional gas accumulations. Origin is confident that over time it will be possible to continue to mature its reserves position in this manner.
NSAI has assessed Origin’s 3P reserves position at 30 June 2008 as 10,138 PJ, a net increase of 121 per cent compared with Origin’s assessment at 30 June 2007.
Contingent Resources represent accumulations of CSG that are potentially recoverable from known accumulations, but are not currently considered to be commercially recoverable due to one or more contingencies. These may include additional technical information, the cost of recovering the resources, and changes in market access and prices. NSAI has estimated that the 2C or best estimate Contingent Resource in Origin’s acreage is an additional 15,869 PJ. This assessment is over and above the 3P reserves assessment.
In addition Origin holds significant exploration acreage where the level of exploration does not allow a Contingent Resource to be estimated, but where nonetheless coal exists with the potential to contain recoverable gas. The majority of this acreage is located in the remote Galilee Basin in central Queensland. NSAI has estimated that within Origin’s existing tenements a further 17,947 PJ of Prospective Resource may potentially be recoverable from undiscovered accumulations in these areas by application of future development projects. Such Prospective Resources will require further exploration and appraisal activity to better establish the quantum of resource present, and may, or may not, prove to be commercial.
Mr King commented “We are also today reporting record production and sales revenue for our Exploration and Production segment, in our final Quarterly Production Report for the financial year ended 30 June 2008.
“Total annual production of 101 PJe and sales volumes of 101 PJe were records, increasing by 15% and 9% respectively. This was largely driven by increases in CSG production and commencement of the Otway Gas Project” he said.
Sales revenue for the year was also a record, increasing 12% from the prior year to $531 million. This strong performance was driven by increased CSG production, a 12 month contribution from the liquids rich BassGas project, and initial contributions from the Otway Gas Project and the Swift assets acquired in New Zealand. These increases more than offset lower production from mature assets in the Cooper, onshore Otway and Perth basins.
Mr King added “Oil production from the small Perth Basin oil fields declined significantly during the year, partially offset by an increase in oil production from the Cooper Basin. Production of condensate and LPG from our offshore gas fields increased significantly, with the BassGas project delivering a full year of production and the Otway Gas Project reaching steady peak production by the end of the year.
“Nonetheless the decline in oil production from the very high margin onshore Perth Basin oil fields will dampen the impact that record revenues will have on earnings growth in Origin’s Exploration and Production segment.
“In the next financial year we expect growing CSG production, a full year contribution from the Otway Gas Project and, in the 2010 financial year, commencement of the Kupe Gas Project” said Mr King.
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- The Origin equity interest assessment of reserves and resources by NSAI does not include any allowance for State royalty and overriding royalty interests common in the petroleum industry. Origin’s equity interest may change from time to time in the future, and some of Origin’s CSG tenements are subject to commercial arrangements under which, after the recovery of acquisition, royalty, development and operating costs, plus an uplift on development and operating costs, a portion of some of the interests held by Origin may revert to previous holders of the tenements. Origin does not believe that reversion will occur under current development and production plans based on the commercial information outlined in this release.
Origin boosts gas supply to southern markets
Origin has secured additional gas supply and transport that will enable it to materially increase gas supply to customers in southern markets, helping to alleviate a potential forecast shortfall in supply identified by the Australian Energy Market Operator (AEMO).