Shaping the Cooper Basin's 21st century
renaissance
The Department of Manufacturing, Innovation, Trade, Resources and Energy (DMITRE) SA
has been successfully using competitive acreage releases to manage highly prospective
Cooper Basin acreage since 1998. The expiry of long-term exploration licenses enabled the
most significant structured release of onshore Australian acreage in the industryʼs history—it
has generated:
2
•
32 petroleum exploration licences (PELs) from ~70,000 km acreage;
•
$432 million in guaranteed work program bids;
•
70 new field discoveries;
•
$107.6 million royalties and $1.4 billion sales; and,
•
increased gas supply-side competition.
Cooper acreage turnover has also changed the makeup of Australiaʼs onshore exploration
industry from numerous company-making discoveries. Since 1998, 10 acreage releases have
been staged, enabled by the Petroleum Act 2000 (now the Petroleum and Geothermal Energy
Act 2000), conjunctive agreements with Native Title claimants, access to multiple-use
Innamincka and Strzelecki Regional Reserves, and transparent application and bid
assessment processes.
Despite delays, most recently due to flooding, all but three of the original PELs are in their
second term and relinquished acreage has been incorporated into subsequent releases. All
work-program variations have been kept above the second bid score (except one, where the
second ranked bidder was consulted and approved the change) preserving bidding system
integrity.
DMITRE is planning new Cooper Basin acreage releases while contemplating acreage
management options for emerging unconventional plays. Industry input to map the best
possible future for the SA Cooper Basin continues to be welcomed.
Regulatory framework
State and Commonwealth agencies are responsible for managing the communityʼs in-theground minerals and energy resource assets. South Australiaʼs asset-management approach
aims to maximise the net public benefit derived from discovered and undiscovered mineral
and energy resources. DMITRE is the lead agency facilitating ecologically sustainable
petroleum exploration and development in SA. Its operations cover promotion of petroleum
110817-01: Elinor Alexander
Shaping the Cooper Basin's 21st century renaissance
1
acreage opportunities through marketing and providing geoscientific data and information,
regulating the upstream petroleum industry, and optimising royalty-income streams.
DMITRE regulate onshore petroleum acreage through the Petroleum and Geothermal Energy
Act 2000, which established a formal legislative framework for competitive tenders (both work
program and cash bidding) and over-the-counter applications. Work-program bidding was
established to allocate all petroleum exploration tenements in producing basins (i.e. the
Cooper and Otway basins), which are gazetted competitive tender regions. Competitive
tenders were first applied to manage the expiry of PELs 5 and 6 across the Cooper Basin in
February 1999—one of the most significant staged releases of highly prospective Australian
onshore acreage.
The selection of winning bids is achieved by a scoring system that establishes a 'risked net
present value in well equivalents' as the basis to rank work program bids (Morton and
Alexander, 2002). The scoring system has been adapted for each Cooper and Otway basin
acreage release based on the density of existing exploration data, size of the block(s), and
the best technology to evaluate petroleum potential. For example, scores for new seismic
acquisition in a block that already has excellent seismic coverage and ready-to-drill prospects
would be lower relative to drilling in that bid round.
Alternatives to work program bidding include cash bidding and first-in-best-dressedʼ or overthe-counter applications—the latter are accepted for frontier SA basins with limited
infrastructure, seismic, and drilling coverage; thus, with higher exploration uncertainties. Cash
bidding has not been used for offshore Australian permits since 1993 and was tried with a
work program component unsuccessfully in 2001 for small Cooper Basin blocks (former
Petroleum Production Licenses [PPLs]). The Federal Governmentʼs Energy Policy White
Paper (November 2011) reconsiders cash bidding for highly prospective offshore areas. The
Queensland Government introduced cash bidding in January 2012. APPEA have opposed
cash bidding because it perceives that money would be diverted from exploration to cashbidding auctions.
Cooper Basin bidding rounds
Work program bidding was used from the mid-1980s for releases in the Otway, Officer, and
Stansbury basins and for acreage relinquished by the Delhi-Santos JV (Arrowie, Arckaringa,
Pedirka and Simpson, Basins). These acreage releases provided an opportunity to test
acreage management and competitive-tender approaches for the expiry of PELs 5 and 6. Ten
rounds of work-program bidding have been conducted in the SA Cooper Basin since 1998
(Fig. 1).
110817-01: Elinor Alexander
Shaping the Cooper Basin's 21st century renaissance
2
Figure 1: Staged acreage releases in the Cooper Basin, 1998–2010.
110817-01: Elinor Alexander
Shaping the Cooper Basin's 21st century renaissance
3
Table 1: Cooper Basin bidding results: expenditures are for winning bids.
Many operators have aggressively explored their licences and successful explorers have
invested in appraisal and development drilling and facilities (e.g. roads, pipelines, bridges).
Some operators have varied work programs down from their original bids; however, variations
have not been allowed to drop below the second bidderʼs score without their approval—this
has occurred only once in the basin. Another option is to substitute a drop of acreage
proportional to work not completed—some operators have used this option. The relinquished
acreage goes back into the mix for new releases, providing turnover and access by other
explorers.
The first three Cooper Basin bid rounds (CO98, CO99, and CO2000) were designed to offer a
range of play types from Eromanga Basin oil leads beyond the Cooper Basin limit, to oil and
gas plays in core areas. The 27 blocks in the first three bidding rounds opened up ~94% of
SA Cooper Basin exploration acreage. The CO2001 release was prompted by an explorerʼs
request after the Santos joint venture relinquished six small PPLs containing oil and gas
prospects. These single-prospect blocks were offered on the basis of cash bidding with a
work program (cash bids were to be refunded to unsuccessful bidders); however, no bids
were received.
Cash bidding is still not a preferred option for the Australian exploration industry; it may have
been a disincentive for the CO2001, but the blocks were small and uncertainties about land
access existed at that time. The CO2001 areas were re-released in 2002 as one block, purely
for work program bidding with no cash component, but again no bids were received. Their
small size and perceived reward may have again precluded bidding; in addition, the oil price
was low in 2001–2 (US$24–25/bbl [BP, 2011]). These blocks remained vacant until
relinquishments in surrounding PELs enabled incorporation into new release blocks.
110817-01: Elinor Alexander
Shaping the Cooper Basin's 21st century renaissance
4
The region around Coongie Lakes was withheld until environmental requirements for
exploration access were resolved, then released as the CO2003 block. In 2004, relinquished
PPLs in the Nappamerri Trough were offered as the CO2004 release block with tight gas and
oil play trends; however, no bids were received. This block attracted multiple bids the
following year when re-released as CO2005 at the request of an explorer. This area is now
regarded as prime acreage for the Roseneath-Epsilon-Murteree shale gas play and a basin
centred gas play, which Beach Energy is presently exploring.
By 2008–9, mandated partial relinquishments were occurring in the original 27 blocks at the
end of the first five-year term. This newly vacant acreage was offered as the CO2009 and
CO2010 releases, both of which attracted multiple bids. The basin is again almost fully under
licence or application. DMITRE is now monitoring upcoming relinquishments with a view to
preparing new acreage releases in the basin (Fig. 2).
110817-01: Elinor Alexander
Shaping the Cooper Basin's 21st century renaissance
5
Figure 2: Cooper Basin licenses, new entrant discoveries and upcoming acreage drops
(March 2012).
Conclusion
Most Cooper Basin exploration licenses are now in their second term and exploration activity
is ongoing; however, licence suspensions granted during the 2009–11 La Nina flooding have
delayed relinquishments in a few PELs. The integrity of the work-program bidding system is
paramount and is demonstrably being maintained. Work program bidding will continue to
110817-01: Elinor Alexander
Shaping the Cooper Basin's 21st century renaissance
6
apply for future releases of Cooper Basin exploration acreage releases. DMITRE always
welcome industry input into acreage management in SA.
References
ALEXANDER, E.M. AND MORTON, J.G.G., 2001—Selecting the winning bid. APPEA Journal
39 (1), 297–321.
BP.,
2011—Statistical
Review
of
World
Energy.
Accessed
8
February
2012.
<http://www.bp.com/sectionbodycopy.do?categoryId=7500&contentId=7068481>.
110817-01: Elinor Alexander
Shaping the Cooper Basin's 21st century renaissance
7