Fairstar's management is strongly of the belief that diversification is the most effective vehicle for managing any financial risk and this applies also to exploration. With this in mind, on July 3, 2007, the Company entered into a Farm-in Agreement with Knight Industries Pty Ltd (KIPL) for oil and gas exploration in KIPL's Petroleum Exploration Permit (PEP) 165 in the Victorian part of Murray Basin, in the State of Victoria.
The PEP 165 is located near the Towns of Sea Lake and Robinvale in a gravity low that extends southwards from the concealed north east trending Balaranald trough beneath the Murray Basin.
The Murray Basin covers areas of three Australian States; southwest New South Wales, extending west into South Australia and south into Victoria.
Project Geology
The Murray Basin hosts a number of basement depressions which contain Palaeozoic and Mesozoic sediments. These depressions and their geology are camouflaged by the Cainozoic consolidated and unconsolidated sediments.
It is these sediments, protected in these depressions, which are likely to contain the potential oil and gas resource(s), and are the targets for exploration.
The Murray Basin unconformably overlies and on-laps the Proterozoic sequences of Willyama and Broken Hill Blocks in the northwest, meta-sediments of the Kanmantoo Fold Belt in the west, overlies the Ordovician to Devonian Lachlan Fold Belt sequence in the east, and on-laps the Cambrian to Lower Carboniferous Lachlan Fold Belt sediments in the south. To the north, the Cainozoic Murray Basin sequence overlies the Palaeozoic Darling Basin and its infrabasins. The Murray Basin sequence forms a thin but extensive platform cover succession with its main depocentre located in the western part of the basin.
Based on Bouguer gravity, a number of concealed 'troughs' have been recognised in the Murray Basin. The existence of these structures has been confirmed in many cases by drilling. The 'troughs' in the west and north of the basin in New South Wales and in western Victoria (such as the Netherby Trough) generally contain Devonian to Early Carboniferous sequences resembling those of the Darling Basin to the north.
The 'troughs' in the east generally contain Late Carboniferous to Triassic sediments, most notably the north northwest trending Ovens Graben, which contains a thick Permian Coorabin Coal Measures sequence that has not been intersected elsewhere outside of this graben. The 'troughs' lying beneath the Murray Basin appear to be mainly a mixture of deep grabens and half grabens, and shallower gentle basement down warps.
Knight Direct Location System (KDLS) Technology
The Knight Direct Location System (KDLS) is Knight Industry's own in-house developed technology.
With Knight's technology, the area of interest is flown a number of times at a height between 610m and 1829m with KDLS's remote-sensing instrument and Global Positioning System (GPS) on board. The survey data is analysed and classified according to type, and size and strength of receiver signal, which in turn allows target ranking.
For hydrocarbons prospecting the exploration starts by locating methane (C1). This allows discrimination between gas and oil deposit(s). If a methane anomaly is detected, a second pass is made with the system tuned to detect decane (C10). (Decane is an alkane hydrocarbon with the chemical formula CH3(CH2)8CH3. 75 isomers of decane exist, all of which are flammable liquids. Decane is one of the components of gasoline (petrol). Like other alkanes, it is nonpolar and therefore will not dissolve in polar liquids such as water.)
After decane identification has been confirmed, the area is flown from different directions with KDLS and GPS on board. The data collected then allows for the delineation of the target in space.
Once an aerial reconnaissance survey detects a hydrocarbon field, a detailed KDLS ground survey is conducted. Ground surveys are typically much more detailed than airborne surveys and not only yield depth to pay zone and thickness of pay zone details, but also yield information on the commercial viability of each accumulation.
Additionally, the technique is used to accurately determine whether the target hydrocarbon field contains:
- Live commercial oil or gas [commercially exploitable]
- Dead or tight oil or gas [bacterially degraded oil or gas, or impervious reservoir]
- Residual or remnant oil or gas [traces of past migration]
Further, Knight Industries believe the system can be used to trace migration paths and source rock locations and identify the number of productive or unproductive accumulations within a field. It detects faults and/or impermeable barriers within an accumulation, which can be particularly useful when positioning well sites.
Prospectivity of PEP 165
PEP165 covers an area of 6018 km². Knight Industries, using remote-sensing Knight Direct Location System, surveyed the PEP 165 area for hydrocarbons and based on the study of this survey considered Section 1 of PEP 165 as a priority area for hydrocarbon exploration. Section 1 encompasses the following three target areas for oil and gas exploration, which are the subject of Fairstar's Farm-in Agreement. The target areas in the order priority are as follows:
Priority I: Sea Lake Prospect
This prospect is the western most of the three target areas. This area of Section 1 was surveyed with the Mark 32R remote sensing equipment. The study of data suggested the presence of twin reservoirs of an aerial extent of a minimum of 910 hectares with total oil pay ranging from 142m to 191m in thickness (with an average of 159m) in the Sea Lake Prospect.
Additionally, the survey suggested that the reservoirs are trapped in a faulted anticline of relatively shallow depth. The surface terrain across the prospect is flat with all weather access. The estimated pay elevations around the perimeter of the Sea Lake Prospect are shown in Figure 13.
Priority II: Tyrrell Prospect
This prospect is situated in the centre of Section 1. The lithological framework of this prospect has not yet been established. However, preliminary surveys of the prospect's perimeter suggest a minimum aerial extent of 450 hectares with single pay zone ranging from 94m to 164m in thickness. It is considered that this prospect might contain up to 68 million barrels of crude.
Priority III: Noxin Prospect
This is the eastern most of the three prospects. The lithological framework of this prospect has not yet been established. However, preliminary work suggests the presence of a twin reservoir with a minimum aerial extent of 310 hectares. On this prospect only one pay zone measurement has been taken. This measurement suggests pay zone thickness of 92m and 58m for each of the two reservoirs respectively. Rough computations suggest that this prospect might contain up to 57 million barrels of crude.