BEFORE THE EPA
BEACH ENERGY RESOURCES NZ (HOLDINGS) LIMITED APPLICATION FOR MARINE DISCHARGE CONSENT (EEZ100019)
IN THE MATTER of the Exclusive Economic Zone and Continental Shelf (Environmental Effects) Act 2012
AND
IN THE MATTER of a Decision-making Committee appointed to consider a marine discharge consent application made by Beach Energy Resources NZ (Holdings) Limited for the discharge of trace amounts of harmful substances from deck drains in the Canterbury Basin
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STATEMENT OF EVIDENCE OF ANDREW ANTHONY KRASSAY FOR BEACH ENERGY RESOURCES NZ (HOLDINGS) LIMITED
Canterbury Basin Programme
Dated: 14 August 2020
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Barristers & Solicitors
J G A Winchester / H P Harwood Telephone: +64-4-499 4599
Email: james.winchester@simpsongrierson.com / hamish.harwood@simpsongrierson.com
DX SX11174 P O Box 2402 Wellington
TABLE OF CONTENTS
Executive Summary 3
Introduction 3
Proposed EAD programme 5
Economic Impact from the EAD programme 9
Appendix A – Proposed Well Names, Locations and Water Depths 10
EXECUTIVE SUMMARY
1. Beach is proposing to undertake an EAD programme in the Canterbury Basin during 2020-2021. Beach is proposing to drill one initial exploration well during 2021 and may pursue a wider work programme that could include up to 11 follow-up exploration or appraisal wells over the next 9 years.
2. There are two structures of interest, one called the ‘Wherry Prospect’ and the other called the ‘Gondola Prospect’. The Wherry Prospect and the Gondola Prospect are more than 80 km apart and, as such, two separate Impact Assessment Areas (IAAs) have been defined in order to assess the impacts associated with the discharges that are the subject of this application.
3. This discharge consent application is for a minor component of the EAD programme. Although there will be no direct economic impact from the possible discharge of trace amounts of hazardous substances via the deck drainage system, the wider potential economic impact to New Zealand from the proposed drilling campaign, if successful, would be substantial.
INTRODUCTION
Qualifications and experience
4. My full name is Dr Andrew Anthony Krassay.
5. I studied geology at the University of Adelaide. I completed a BSc (Hons, 1st class) in 1989 in sedimentary geology. I also graduated with a Ph.D. in basin analysis and sequence stratigraphy at the University of Adelaide in 1995.
6. I am currently employed as General Manager of New Ventures and Frontier Exploration at Beach Energy Limited (Beach) based at the Adelaide head office, South Australia and have held that position since September 2018.
As part of this role, I manage Beach’s exploration activities in New Zealand including PEP38264, PEP52717 and PEP50119.
7. I also manage Beach’s frontier exploration portfolio in other areas including the Carnarvon and Bonaparte basins where Beach has equity in a series of offshore exploration and appraisal assets.1
8. In addition, I manage Beach’s New Ventures activities, including those in New Zealand. As part of this role, I was responsible for Beach’s late 2019 farm-in to the OMV-operated PEP50119 permit and had involvement during the drilling of Tawhaki-1 in the Great South Basin.
9. Prior to the General Manager role, I was New Ventures Manager and have been employed at Beach since February 2013.
10. Prior to Beach, I worked for six years at a global geoscience consultancy, FrogTech, where I was a principal consultant. In this role, I was responsible for business development and technical and project management. Most projects were for international E&P clients and involved regional basin analysis, play2 and opportunity identification for overseas regions including South America, North America, Africa and SE Asia.
11. Prior to that role, I had a career at Geoscience Australia as a team leader of basin studies. In that role, I was accountable for subsurface studies and promotional work to identify exploration opportunities. As part of this government role, I was involved in preparing and documenting areas for gazettal releases.
12. I am an Advisory Board Member for the Australian School of Petroleum at the University of Adelaide.
13. I am a former President of the Petroleum Exploration Society of Australia (PESA ACT Branch) and was involved in the Society in a variety of committee roles for many years.
14. I am a long-standing member of PESA, AAPG (American Association of Petroleum Geologists) and SEPM (Society for Sedimentary Geology).
1 The Carnarvon and Bonaparte basins are offshore of Australia.
2 A “play” or “petroleum play” is a group of prospects in the same region that are controlled by the same set of geological circumstances
Scope of Evidence
15. In this brief of evidence, I will discuss:
(a) Beach’s proposed Exploration and Drilling Programme (EAD programme) and its objectives, including Beach’s obligations as an exploration permit holder under the Crown Minerals Act 1991 (CMA); and
(b) the economic impact expected from this EAD programme.
PROPOSED EAD PROGRAMME
16. Beach, as Operator of PEP 38264, is proposing to undertake an EAD programme in the Canterbury Basin during 2020-2021. Beach is proposing to drill one initial exploration well during 2021. Depending on the results of this well, Beach may pursue a wider work programme within PEP 38264 that could include up to 11 follow-up exploration or appraisal wells to determine the hydrocarbons potential within PEP 38264.
17. PEP 38264 currently has an expiry date of 7 November 2021. On a success case scenario, Beach can seek an extension of the PEP of up to eight years for appraisal purposes, meaning that a second phase of drilling could occur beyond 2021. For this reason, Beach is seeking an expiry date for this marine discharge consent of 7 November 2029.
18. There are two significant geological structures within PEP38264, one called the ‘Wherry Prospect’ and the other called the ‘Gondola Prospect’.
Depending on the results and the learnings from the first well, up to nine follow-up wells could be drilled in the Wherry Prospect and up to two wells at the Gondola Prospect over the life of the proposed discharge consent.
The Wherry Prospect and the Gondola Prospect are more than 80 km apart and, as such, two separate Impact Assessment Areas (IAAs) have been defined in order to assess the impacts associated with the discharges that are the subject of this application. The two IAAs are referred to as the
‘Wherry IAA’ and the ‘Gondola IAA’ and their locations are shown Appendix A. It should be noted that the final location for each well will be determined
closer to the time of drilling; however, each well will be within 1 km of the two locations shown in Appendix A.
19. The boundaries of the two IAAs were determined by plotting 11 km radius circles around each proposed well location and drawing a rectangle that encompasses all the plotted circles at each of the two prospects. The 11 km radius distance allows for the final well locations potentially being 1 km from the proposed locations (refer previous paragraph) plus a 10 km impact assessment distance from each well. It should be noted that the Wherry IAA extends beyond the boundary of PEP 38264 – this is because most of the wells targeting the Wherry Prospect are located close to the northern boundary of the permit.
20. Beach Energy has been an active explorer with joint venture partners in PEP 38264 since acquiring it in 2018. In 2018-2019, Beach undertook a large regional seismic inversion and quantitative project to better define the subsurface prospectivity. This study involved:
(a) a statistical rock physics study of 10 existing wells from the Canterbury and Great South Basin including full petrophysics;
(b) seismic reprocessing of 1240 km of regional 2D data;
(c) prestack seismic inversion3 of 1240 km reprocessed 2D seismic data, the entire Wherry 3D volume (1864 sqkm) and parts of the Waka 3D and Gondola 3D seismic volumes; and
(d) stochastic modelling and quantitative interpretation to generate probabilistic lithology and fluid prediction volumes.
21. Beach also conducted a regional seal study to better understand the quality, composition and distribution of seal rocks and to integrate this information into subsurface prospectivity analyses (seal or cap rocks are the layer of rock with low permeability that impedes the escape of hydrocarbons from
3 Seismic inversion is the process used to reconstruct earth properties. It combines seismic and well-data to predict rock properties (lithology, fluid content, porosity) across a seismic survey. These rock properties can be used to identify hydrocarbon and reservoir. Pre-stack inversion is a particular type of inversion to obtain multiple impedance attributes.
the reservoir rock). As part of this work, rock fragments from four existing wells in the Canterbury Basin and the Great South Basin were sampled.
The samples were then analysed in laboratories to determine seal rock composition, mineralogy and chemistry.
22. In 2019-2020, Beach also undertook additional specialist studies above and beyond the work obligations imposed by the permit. Highly specialised geophysical studies were undertaken which included gather conditioning and reprocessing of the Wherry 3D seismic volume. The objective of these studies was to improve the seismic quality and imaging to better define the Wherry prospect. This work was completed in 2020.
23. As part of the Stage 2 work programme for PEP38264, Beach and the other permit holders were obliged to relinquish a minimum area of 3000 sq km of the permit. The permit holders relinquished 3114 sq km and a relinquishment report was prepared and submitted to comply with Section 35C of the CMA and Regulations 43A of the Crown Minerals (Petroleum) Regulations 2007.
24. In the Stage 3 work programme for PEP38264, the main obligation is to:
“Drill and complete one well to economic basement unless geological and/or engineering constraints encountered whilst drilling make this unreasonable”. This obligation must be met by 7 October 2021. After fulfilling this commitment, the permit holders must also either:
(a) notify the chief executive in writing of the permit holder’s commitment to carry out the next stage of the work programme; or
(b) surrender the permit.
25. Beach has been very active in pursuing various measures designed to fulfil the Stage 3 work programme commitment to drill one well. Beach has identified, mapped, surveyed and defined the proposed exploration well location, along with additional potential appraisal well locations. Beach has also conducted the required pre-drill marine survey to analyse the proposed drilling locations and provide samples, evidence and results to include in consent applications.
26. As mentioned above, the Stage 3 exploration well commitment is proposed to be drilled on the Wherry prospect. The Wherry prospect is a large, structural trap4 similar in type to other structures drilled in the Canterbury and Great South basins. The reservoir is expected to be Cretaceous-aged sandstones similar to those intersected in the Caravel-1 exploration well (2014). The expected hydrocarbon fluid type is gas. Previous exploration wells drilled in the Canterbury Basin - Clipper-1 (1984), Galleon-1 (1985), Cutter-1 (2006) and Caravel-1(2014) - have discovered gas and they are interpreted to be sourced from the same source kitchen5 as Wherry.
27. Beach has an excellent history of meeting all NZ Government permit obligations and provides an updated work programme to MBIE annually as part of the formal review process. These work programmes are discussed during an annual Permit Review Meeting which involves senior representatives of central government, including MBIE, WorkSafe, Maritime New Zealand and the Environmental Protection Authority.
28. A MODU or MODUs will be selected that will be capable of drilling the proposed exploration and appraisal wells and that meet the structural specifications for environmental protection proposed in the marine discharge consent application. Beach has recently conducted two Expressions of Interest to the rig market for provision of a suitable rig to drill the Stage 3 commitment well. Beach is currently preparing an invitation to tender to identify and secure the rig to drill the exploration well. The statement of evidence of Mr McCallum describes the MODU selection process in more detail.
29. It is possible that more than one MODU would be used under the marine discharge consent for the EAD Programme.
30. The final details on the EAD programme, including the number of wells drilled and drilling locations, as well as the drilling process and equipment, will be detailed through subsequent marine consent applications.
4 A structural trap is a geological feature produced by tectonic movement and faulting to create a spatial arrangement of rocks that can trap hydrocarbons in the subsurface.
5 The source kitchen is an area in the subsurface where the organic-rich rocks (source rocks) that could generate hydrocarbons have reached adequate conditions (temperature, pressure, and time) to generate and expel hydrocarbons.
ECONOMIC IMPACT FROM THE EAD PROGRAMME
31. The oil and gas industry generates over 5,068 full-time-equivalent (FTE) jobs directly in New Zealand. The industry contributed over $2.79 billion to New Zealand’s GDP, and has contributed approximately $1.5 billion in royalties over the last 4 years. Indirectly, the industry is responsible for the employment of approximately 11,720 FTEs (Venture Taranaki, 2015).
32. In Financial Year 2019, Beach NZ paid $53.1 million to the New Zealand government in taxes and royalties from Beach’s activities. Beach directly employs 75 staff across its Kupe site and New Plymouth office.
33. This discharge consent application is for a minor component of the EAD programme, I do not anticipate that there will be an economic impact from this consent.
34. The potential impacts from the proposed drilling campaign, if successful, could equal GDP of up to $461 million, employment for 1,656 FTE-years, and household incomes of $86 million.6
Andrew Krassay 14 August 2020
6 Insight Economics (2020), ‘National economic impacts of proposed oil & gas exploration in the Canterbury basin’, prepared for Beach Energy Resources NZ (Holdings) Limited.
Appendix A – Proposed Well Names, Locations and Water Depths
Impact assessment areas for the Canterbury Basin EAD Programme
Water depths
For the Wherry IAA, the water depth ranges from 1,200 – 1,450 m. This is the water depth range for the 10 identified well locations within the Wherry IAA. For the Gondola IAA, the water depth ranges from 1,300 – 1,740 m, the two identified well locations within the Gondola IAA are in water depths of 1,370 – 1,400m. There are no well locations planned for the deeper portions of the IAA such as the channel floor.
In terms of bathymetry, the available information suggests the Wherry IAA is relatively featureless being within a relatively gently sloping basin area. The Gondola IAA includes parts of both the Waitaki Channel (in the north) and the Karitane Channel (to the south). The bathymetry is relatively flat and featureless at and near to the two proposed well locations.
Well names
The first exploration well to be drilled in the Wherry IAA will be called “Wherry-1”.
Subsequent proposed appraisal wells would be named Wherry-2, -3 and so on. If a well is located on a separate sub-culmination of the greater Wherry structure it is likely to have a derivative name such as Wherry West-1 for a western near-field exploration (NFE location). The first well to be drilled on the Gondola prospect would be named Gondola-1.
Well locations
There are ten identified well locations within the Wherry IAA. The locations are shown on the map below. It should be noted that the final location for each well will be determined closer to the time of drilling; however, each well will be within 1 km of the locations shown.
The final location of the first exploration well, Wherry-1, has been agreed with the PEP 38264 joint venture partners. The current intention for the proposed well location is latitude 450 04’ 13.08” South, longitude 1730 01’ 9,06” East with a water depth at that location of approximately 1,330 metres.
There are two identified well locations within the Gondola IAA. The locations are shown on the map below. It should be noted that the final location for each well will be determined closer to the time of drilling; however, each well will be within 1 km of the locations shown.
Map of well locations within the Wherry IAA
Map of well locations within the Gondola IAA
