ConocoPhillips has made a second gas discovery in Victoria’s offshore Otway Basin, striking gas in the Charlemont-1 exploration well as debate intensifies over the federal government’s proposed domestic gas reservation scheme, which is expected to push down east coast gas prices.
Junior partner 3D Energi (ASX:TDO) said gas was encountered during drilling over the Christmas period, earlier than anticipated, although a technical incident forced operations to pause, leaving the size and commercial significance of the discovery unclear.
ConocoPhillips has not formally confirmed the strike, saying only that drilling operations are being managed in line with standard procedures.
The discovery follows a successful first well, Essington-1, drilled last month by the joint venture, which includes Korea National Oil Corporation and identified two separate gas accumulations.
Each well in the campaign carries a budgeted cost of about US$55 million before testing and is located around 55km offshore near Port Campbell, targeting new supply for the tight east coast gas market.
However, the outlook for developing the gas is clouded by the government's reservation scheme, unveiled before Christmas by Energy Minister Chris Bowen, which aims to create a modest domestic gas surplus to ease prices.
3D Energi executive chairman Noel Newell said aspects of the policy were problematic for developers, arguing it risked undermining price negotiations and discouraging investment after years of regulatory approvals and high offshore drilling costs.