Early results from the search for onshore gas in the Northern Territory are "very encouraging".
Santos today told shareholders it had recorded "better than expected gas flow rates" from its deep Tanumbirini-1 well east of Daly Waters.
Origin Energy and Falcon Oil and Gas has also reported good early results from its now delayed exploration activities in the Beetaloo Basin.
The first new well drilled almost two kilometres deep into the Beetaloo Basin has produced "very encouraging" results.
Origin Energy and Falcon Oil and Gas say the Kyalla 117 well, south-east of Daly Waters, was drilled to 1895 metres deep.
"Results obtained from operations to date in the target shale formation demonstrate good reservoir continuity, conductive natural fractures, and continuous gas shows," the joint venture explorers said.
That exploration has stalled after a horizontal well being drilled from the vertical shaft struck trouble.
Today, Santos managing director and chief executive officer Kevin Gallagher said in a quarterly update to shareholders "better than expected gas flow rates from the ongoing Tanumbirini-1 vertical well test are very encouraging and an important step in Santos' appraisal of the significant resource potential of the McArthur Basin".
The Santos Tanumbirini-1 well has been drilled vertically almost four kilometres deep, and had been previously drilled during early exploration in 2013.
Santos returned to the Tanumbirini-1 well in November to continue the test "of the significant resource potential of the onshore McArthur Basin (Beetaloo Sub-basin)".
The company said it had a four-stage stimulation (fracking) program at the previously drilled vertical well.
"Production testing is ongoing, with test results confirming a gas discovery in the Middle Velkerri shale gas play," Santos said.
"Gas flow rates of rates of over 1.2 mmscf/d (million cubic feet per day) have been recorded, exceeding initial expectations for the vertical well.
"Preliminary gas composition analysis indicates 90% methane, less than 5% total inert content and 3% ethane.
"The results at Tanumbirini-1 provide critical data to inform the next phase of appraisal, which is expected to include the drilling and multi-stage stimulation of two horizontal wells commencing in the first half of this year."
Mr Gallagher said: "Natural gas is forecast to supply a quarter of the world's total energy demand by 2040 and Santos, with its portfolio of long-life natural gas assets, is well positioned to benefit as we seek to deliver 120 mmboe (million barrels of oil equivalent) of production by 2025."
"We are also investing in projects to lower emissions and assessing the significant potential for carbon capture and storage in the Cooper Basin," Mr Gallagher said.
Santos will announce its annual results in Adelaide on February 20.
Protect Country Alliance spokesman Graeme Sayer said: "Santos is gambling with the future of the NT by trying to please their investors. But if the company is so financially secure, why isn't Santos paying proper tax rates to Australians who own the gas?
"Santos can crow to investors all it likes, yet it's the people on the ground across the Territory who will suffer if the company's invasive fracking plans reach fruition. Fracking in the NT has the potential to destroy water and Territiorian's livelihoods."
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