Omega Oil and Gas targets east coast supply boost with Canyon-1H drilling campaign

Fresh from a $6.5 million capital raising, junior explorer Omega Oil and Gas (ASX: OMA) is aiming to unlock new gas reserves for the energy-hungry eastern states market.

The company is preparing to spud its Canyon-1H well later this month after one of Australia’s largest onshore drilling rigs was released to its care over the weekend.

The giant Ensign rig #965 has just completed a nearby horizontal three-well program for Shell.

Greater testing surface

“Ensign rig #965 is the right rig for Omega’s important first test of the flow capacity of the deep, tight gas sands in the Taroom Trough,” Omega chief executive officer Trevor Brown told shareholders.

Canyon-1H is being drilled with a 600m to 1,100m horizontal section, with Omega planning to undertake a multi-stage hydraulic fracture stimulation, flowback and production test.

“A horizontal well provides a vastly greater reservoir surface area for testing than a vertical well, thus giving the selected reservoir interval the best chance to flow at a potentially commercial rate,” Mr Brown said.

“This approach also allows Omega to obtain valuable early appraisal data, enabling rapid progress toward further appraisal and development of the field.”

Taroom Trough target

The Taroom Trough, where Canyon-1H will be located, is one of the most active onshore oil and gas exploration areas in Australia.

Apart from Shell, explorers currently hunting for gas in the region include Elixir Energy (ASX: EXR), which has confirmed a new deep pay with its Daydream-2 well.

Mr Brown said Taroom is known to contain vast volumes of gas trapped within relatively deep, low-permeability reservoirs and is the focus of significant industry activity, with programs currently being conducted by Omega and neighbouring operators to test some of its potential.

Much-needed gas

“Development of these badly-needed gas volumes will almost certainly be achieved dominantly by the application of modern horizontal drilling and fracture stimulation technologies,” Mr Brown said.

“By applying these methods early in our appraisal campaign, Omega will maximise the chance of obtaining potentially commercial flow rates and gain valuable appraisal data that will put us on the fastest possible path toward field development.”

Omega is targeting potential shortfalls in the east coast gas market from 2027 and says the Canyon project is ideally placed.

With east coast spot pricing averaging over $14 per gigajoule over the last three years and a supply deficit set to increase, success at Canyon would be a game-changer for Omega.