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Santos’ CSM Activities

Steve Taylor

27 August 2004

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Main WalloonCSM Fairway

Main BaralabaCSM Fairway

Fairview -Durham RanchCSM Fairway

"Santos Operated Permits

Other Permits

MoranbahCSM Area 50 0 50 100 km

Denison TroughExploration

RomaShallow Gas

Scotia

Santos CSM Activities

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CSM Exploration

• Predominantly conventional gas in ATP 337P (Santos/Origin); northern area farmed out to Comet Ridge Ltd. for CSM exploration

• Flank of Comet anticline has shallow Rangals Coal Measures (200 – 250m) with a thick Pollux seam (7m)

• Two core holes drilled in April with moderate gas content and indications of free gas

• Anticipated future exploration comprises one test well and additional core holes to further evaluate area

Northern Denison Trough

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CSM Appraisal

• Long established conventional gas asset with infrastructure

• Similar depths and coal thickness to Walloons pilot gas projects to east

• Pleasant Hills-8a drilled in 1969 as replacement for Pleasant Hills 8 following blow-out over the Injune Creek Beds

• Well completed in 1988

• Production performance indicates gas is being produced from the adjacent coals

Roma

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CSM Production - Scotia Field

Bowen Basin Area

Eastern Queensland

Coal Seam Methane

Project Areas

148° 150°

26°

24°

26°

24°

148° 150°

Bandanna / BaralabaOutcrop Edge

Burunga Anticline

PlanetDowns

Santos Operated

CookSouth Blackwater

Blackwater

Curragh

Moura Mine Site

Emerald

Springsure

Rolleston

Blackwater

FairviewDuffers Ck

DurhamRanch

Moura/Dawson RiverProject (OCA)

Scotia Project(Santos)

Fairview/Durham Ranch

Project(Tristar/Transfield)

Moura

0 25 50

Kilometres

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Scotia Exploration HistoryGeological Background• Structural setting: Burunga Anticline, Bowen Basin

• Reservoir: Permian Baralaba Coal Measures

- three to four coal seam reservoirs

- reservoir depth: 650 to 900 m

- naturally fractured

- fracture stimulated to improve productivity

• Gas productive coals: immediate gas flow from coal seams with nil to minimal dewatering

• Gas content approx. 11 m3/t; permeability 0.1 to 15 md

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Scotia Exploration HistoryScotia Field

• Initial activity target gas in sandstones and volcanics

• Scotia coal seam methane exploration commenced in 1996 following Peat discovery in 1994

• Scotia 3, 4 and 5 drilled between 1996 and 1999 to investigate coal seam methane potential of Scotia Area

• Scotia 6 and 7 drilled in 2000 to confirm reserves for CS Energy gas contract

• Multi-well appraisal and development drilling/frac programme completed in 2001 (Scotia 8 to 16)

• Production startup May 2002

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Scotia – Schematic cross-sectionStructural style: anticlinal structure in compressive stress regime

N S

Coal Seam Methane Gas Cap AccumulationBurunga Anticline

Scotia Field

200

400

600

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PrecipiceSandstone

RewanFormation

Upper BaralabaCoal Measure

Mid BaralabaCoal Measure

Lower BaralabaCoal Measure

DEPTHSS (m)

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Scotia – West-Seismic line

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2D Seismic Section

East West

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Scotia 4 Well Log Section

UPPER BARALABA

COAL MEASURES

•Drilled 1997 to obtain coal cores for gas desorption and reservoir characterisation

•C2 seam fracture stimulated in 1999

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Fracture Characterisation• Cleat system, microfractures (base permeability)

• Natural Fractures (enhanced permeability)

• Faults (stress distribution)

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Scotia Coal Seam Reservoir Characteristics

SEM Image of bright coal showing unmineralised cleat development

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Scotia Image Log - Coal Seam Fracture

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Scotia Image Log – Interseam Fracture

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Australian stress map

• σHmax~ 30 degrees• complex stress regime, at

cusp between strike slip and reverse:σv<σh<<σH

σh<σv<<σH

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Fracture Distribution, Reservoir

Three orientations, each consisting of a conjugate set

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Scotia• Geomechanical modelling

conducted to predict fracture distribution

• Fracture sets in Scotia are

- fold-related

- NW and NE conjugate sets

- intensity related to curvature due to local faulting

•Stress distribution modelled using stress tensor from wells

150 05 00 E

25 55 00 S

205000M E 210000M E

7125000M N

7130000M N

7135000M N

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C2 CoalDepth Structure Map (mSS)

April 2004

PL 176

3ST

4

21

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108

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1415

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Depth mSS280

1000

350400450500550600650700750800850900950

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Conclusions

Reverse stress geometry, high mean stress, poor stimulation

Strike-slip stress geometry, low mean stress, successfully stimulated

• In-Situ stress varies over field

- Variations due to presence of small faults

• Poor stimulation/production in areas of reverse stress regime regardless of:

- Mean & deviatory stress

- Natural fracture density

• In-situ stress tensor is the controlling factor

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• Stress regime affects stimulation efforts• Stimulation and draw-down induced faulting

Mechanical Issues

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Good Scotia Well - 7.8 MMcf/d

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