In July and August 2004 Great Artesian and Traditional Oil drilled the Smegsy-1, after an agreement to farm into the Smegsy Block of PEL 106 was entered into by Enterprise.
Enterprise, by funding 50% of the well costs, earned the right to have a 25% interest in any subsequent production licence across the Smegsy gas field. Several gas bearing sands were intersected in Smegsy-1, with a review by independent experts warranting the casing and suspension of the well for subsequent cased hole production testing. This testing was undertaken in late November and early December 2004.
During 2005 the Smegsy Joint Venture, comprising Enterprise and Great Artesian (operator) became the first third party to negotiate a gas sales agreement with the South Australian Cooper Basin Producers (SACBP). This is a milestone recognized by the South Australian Government’s Minster for Resources in his announcement of 1 September 2005. The Hon Patrick Conlon, Acting Minister for Mineral Resources Development referred to this as a “vital agreement” and that “The agreement makes it clear that junior explorers can discover and commercialize gas accumulations in the Cooper Basin”.
In addition the Smegsy Joint Venture negotiated the first third-party well tie-in agreement and maintenance agreement. Under the terms of these separate agreements the SACBP will design and construct the 4.5 km tie-in pipeline from Smegsy well head to a connection point on existing pipeline infra-structure. Construction will be funded by the Smegsy Joint Venture and will be completed by the end of February 2006.
Construction of the Smegsy tie-in pipeline commenced in January 2006 and first production commenced on 3 March 2006. Initial production of gas was between 4 and 5 million cubic feet of raw gas per day. This production rates declined to unexpectedly low levels. Following preliminary engineering review it was suspected that the possible reason for the decline in pressure the ingression of water, due to a plug failing to adequately seal off the producing zones from underlying water bearing zones. A static gradient test and pressurization tests was conducted and this confirmed that water encroachment was occurring from one of the two producing zones and that it would be necessary to install a plug in order to prevent further water encroachment and recommence production from the remaining zone.
No further field activity is contemplated until interpretation of the Spinel 3-D survey has been completed. In conjunction with the operator, Great Artesian Oil and Gas Limited, Enterprise is participating in a commercialisation feasibility project involving a low pressure gas gathering system between Rossco, Paprika, Smegsy and third party discoveries located within PEL 106.