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Hydrogeological Assessment for Multi-Well Exploration and Appraisal Production Testing from Deep Coal in PEL 96 Southern Cooper Basin

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Hydrogeological Assessment for Multi-Well Exploration and Appraisal Production Testing from Deep Coal in PEL 96 Southern Cooper Basin Hydrogeological Assessment for Multi-Well Exploration and Appraisal Production Testing from Deep Coal in PEL 96 Southern Cooper Basin Prepared for: Strike Energy Limited 16 December 2014 hydrogeologic Hydrogeologic Pty Ltd ABN 51 877 660 235 PO Box 383, Highgate South Australia 5063 hydrogeologic OVERVIEW Strike Energy is conducting an exploration and appraisal program to evaluate the gas resource in Permian coal seams at depths up to about 2100 metres in the Weena Trough in the southern Cooper Basin about 100 km south of Moomba in South Australia. This report provides hydrogeological information to support the Environmental Impact Report (EIR) prepared under the Petroleum and Geothermal Energy Act 2000 to cover proposed multi- well production testing from deep coal in the Patchawarra Formation in Petroleum Exploration Licence (PEL) 96. Through 2013 and 2014, Strike Energy has drilled, stimulated and flowed back two wells (Klebb- 1 and Le Chiffre-1) in PEL 96, which have confirmed the presence of gas and water in the coals. Through the latter half of 2014 and into 2015, Strike is proposing to drill additional wells at the Klebb and Le Chiffre sites and then undertake multi-well production tests by pumping water for several months to initiate gas flows and test production. This small scale exploration, production testing and appraisal program proposed by Strike aims to determine the reservoir pressure at which gas production commences (the critical desorption pressure), to achieve sustained gas flows to surface and to obtain data on gas composition, reservoir fluid composition, formation water production volumes and pressure effects. Subsequent multi‐well testing will focus on well spacing and production optimisation. Hydrogeological information will also be obtained to support detailed assessments in further project stages, and to reduce uncertainties and data gaps on aquifer inter-aquifer connectivity and potential effects on the mapped GAB spring at the north-western end of Lake Blanche (contained within the PEL 96 boundary). While there is a reasonable level of broad hydrogeological knowledge in the region, notably documented in the 2012 CSIRO studies of the GAB (Eromanga Basin), there is limited specific hydrogeological data available on the underlying Cooper Basin aquifer and aquitard systems, including in the PEL 96 project area. It is also noted that Cooper Basin aquifers have very limited utility as a water resource as they are overlain by the productive aquifers of the GAB, and deep (expensive) bores would be required, not justifying the low yielding and brackish to saline water. The available knowledge base has been updated by the drilling and stimulation activities to date at Klebb-1 and Le Chiffre-1. This information has been used to undertake a hydrogeological impact assessment, with an overall conservative approach that assumes that the PEL 96 activities are occurring within the overlying GAB aquifers, rather than the deep Cooper Basin units. Strike modelling undertaken prior to the draft EIR preparation indicated water production rates may be in the order of 1500 bpd (barrels per day i.e. 240 kL/day) per well. Over the six month appraisal testing program, this would equate to approximately 44 ML per well (i.e. conservatively assuming that there would be no decline in production over this period). Assuming 10 wells (and there will likely be less than 10 wells for the appraisal program), this could conservatively amount to a volume of 440 ML over six months. This is equivalent to 2.4 ML/day, which is 4% of the water allocation plan allowance of 60 ML/day for the petroleum sector, and would amount to a 7% increase on the current production rate of about 33 ML/day (likely to decrease as water production declines during the appraisal test). Early results (to December 2014) of ongoing flow testing at Klebb-1 and Le Chiffre-1 have indicated that the wells are co-producing less water than expected when the draft EIR was developed. Klebb-1 is producing water at 200 bbl/day (32 kL/day), Le Chiffre-1 is producing 1200 bbl/day (190 kL/day), and production has shown rapid declines. The total production rate per site is demonstrably less than 1 ML/day. 61.017.1e_PEL96_Multiwell_ProdTest_Groundwater_20141216.docx 2 hydrogeologic The appraisal testing project parameters and predicted hydrogeological impacts have been assessed under a highly conservative set of assumptions as being completely consistent with the requirements of the Far North PWA Water Allocation Plan (SAALNRM Board, 2009), including (see also Figure 18 for locations of spring exclusion zones): highly conservative conceptualisation (e.g. all water production from the Hutton Sandstone not the Patchawarra Formation), conservative aquifer parameter values (representative of a high permeability GAB aquifer) and application of the WAP- specified (de Glee) analytical modelling methodology the water balance assessment considers an appraisal program of up to 10 wells extracting at up to 0.24 ML/d per well, totalling 2.4 ML/d (or 440 ML volume over 6 months), which is 4% of the sustainable diversion limit established by the WAP of (60 ML/d), or 2% of the annual volume allocated to the petroleum sector (21.9 GL/a) the water balance assessment conservative assumptions include more wells than are actually planned and that there would be no decline in water production over this period (although this is very likely) ongoing flow testing has confirmed that actual production rates are much lower than initially predicted, amounting to less than 1 ML/day total at each site, consistent with principle 17 of the WAP the 5 km spring exclusion zone is located at a distance of 47 km from Klebb (the closest site), whereas the predicted 0.5 m drawdown is calculated (using the WAP-specified steady state method) to apply at a distance of just 40 km for an assumed extraction of 5 ML/d (which is more than twice the amount required for the appraisal test) the edge of the Southwest Springs Zone is located 41 km from Klebb, and the cumulative drawdown impact assessment is calculated as 0.5 m at 40 km, well within the 1 metre constraint (assuming 5 ML/d and steady state drawdown) sensitivity analysis with Patchawarra aquifer properties and Roseneath-Murteree aquitard properties results confirms the robust conservatism in the calculations the State border drawdown trigger (10% of the aquifer pressure head) amounts to 10 m at a distance of 90 km, whereas a maximum of 0.5 m drawdown is predicted at a distance of 40 km (i.e. compliance with the spring constraint in this case ensures compliance with the border constraint). The proposed data gathering during and following the appraisal testing will provide detailed and site-specific data for more detailed assessments in the future. A program for data gathering and future monitoring of hydrogeological parameters has been developed and will be progressively refined as the project develops, but would nominally involve: Collection of confined aquifer pressure, water production and water quality data for the Patchawarra Formation during the production testing Collection of baseline data on confined aquifer pressures and water quality in the Hutton during the drilling and appraisal program Collection of unconfined groundwater quality data Collection of detailed hydrochemistry and isotope data from GAB bores and springs GAB spring monitoring Aquifer pressure monitoring in GAB wells Water level monitoring in other non-GAB wells Possible conversion of one of the Klebb wells to a GAB monitoring well after the production testing program. 61.017.1e_PEL96_Multiwell_ProdTest_Groundwater_20141216.docx 3 hydrogeologic Contents 1 INTRODUCTION ......................................................................................... 7 1.1 Background on PEL 96 Program ................................................................. 7 1.2 SEO, EIR, EAR and Hydrogeological Assessments for PEL 96 ................................ 9 1.3 Multi-Well Production Testing and Appraisal ................................................. 9 2 Contextual Information .............................................................................. 11 2.1 Geological Setting ............................................................................... 11 2.2 Geographical Setting ............................................................................ 13 2.3 Climate ............................................................................................ 14 2.4 Land Systems and Physiography ............................................................... 15 2.4.1 Tingana Land System ...................................................................... 15 2.4.2 Collina Land System........................................................................ 15 3 Hydrology .............................................................................................. 16 3.1 Regional Drainage Systems ..................................................................... 16 3.2 Strzelecki Creek and Wetland System ........................................................ 16 4 Geology ................................................................................................. 19 4.1 Cooper Basin, Eromanga Basin and Lake Eyre Basin ........................................ 19 4.2 Local Geological Setting (Weena Trough) .................................................... 21 4.3 Weena Trough Stratigraphy and Hydro-Lithology ........................................... 22 5
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