Innovative Energy Consulting Pty Ltd (“IEC”) is a private Brisbane based company that provides a variety of commercial and technical consulting services to the natural gas industry in both Australia and North America. IEC is also involved with the development of underground natural gas storage in salt caverns and depleted petroleum reservoirs through both an ownership position and providing business development services to storage industry players. Furthermore, IEC spent a considerable amount of time searching for a suitable salt deposit in Australia that has potential for underground cavern development for temporarily storing and cycling petroleum products or for permanently storing oilfield or other solid wastes. Underground salt formations, when dissolved to form caverns, are excellent storage mediums as has been well documented in North America. The Middle Devonian aged Boree Salt Member in the Adavale Basin of central Queensland has been identified, based on a screening process that involved both a technical and a commercial perspective, to be a prime area of potential for the development of underground salt caverns. This area has had numerous wells drilled and seismic surveys done for both petroleum and potash potential and therefore an extensive technical database already exists over the salt deposit of interest.
IEC holds EPM 17010 over an area of approximately 256 square kilometres that has been targeted for potential underground salt cavern development. This EPM is approximately 30 kilometres southeast of Blackall, Qld.
In the early 1960s the Adavale Basin was the focus of wildcat petroleum exploration drilling. In 1964 the Amoseas Boree 1 test hole was drilled (roughly in the centre of IEC’s proposed permit area) and although no hydrocarbons of economic quantities were encountered, a thick (503m) evaporite sequence was intercepted in the Middle Devonian at a depth of 1955 m. The evaporate sequence encountered in Boree 1 was named the Boree Salt Member and was at that time considered to be a component of the Etonvale Formation. Subsequent petroleum exploration drilling to the south encountered this salt at increasing depths in the Adavale Trough. The Boree Salt is a thick (up to 580m) sequence of halite, sylvite, mudstones and anhydrites and is deposited quite extensively as an arcuate wedge oriented over this requested permit area and extending in a south-southwesterly direction from it.
The presence of sylvite in the Boree Salt initiated potash exploration which began in the 1980s when Poseidon Minerals secured a large exploration permit in this area and carried out seismic surveys and drilling. Poseidon drilled Boree 2 to the south east of Boree 1 in 1982 in an attempt to calibrate seismic and delineate areal extent of the Boree Salt. The Boree 2 wellbore encountered no salt at all which resulted in a revised seismic interpretation and a focus further to the south between the wellbores Bonnie 1 and Bury 1. The area around Boree 1 was written off at this point as being too small in areal extent for economic potash production. The salt here is interpreted to be a relatively small salt “pillow” resulting from flow up structure over the Ravensbourne Uplift. Core data in the Boree 1 shows fairly highly inclined dips in the salt beds which support this salt flow model.
In 1987 Denison Resources acquired an exploration permit for salt over this general area. Denison’s plan was to develop a solution mine for salt, potash, magnesium chloride and bromides. This plan was economically linked to the proposed development of an ammonium nitrate plant which was then planned at Blackall. Denison carried out detailed petrological studies from cores of the Boree Salt Member to determine the most favourable areas of the salt deposit for their purpose. This work included dissolution rate studies which confirmed that the Boree Salt member has a purity of > 90% NACL. In early 1988, the proposed ammonium nitrate plant was moved to another location in the Bowen Basin and the economic viability of the salt solution mine was severely downgraded and Denison subsequently relinquished their ATP.
In 2004, two EPMs (14747 and 14748) were granted to John Rowntree of NSW. The target for Rowntree’s EPMs was again potash and other associated evaporitic minerals. Rowntree’s consultant (Radke) carried out a detailed review of all existing technical data. While a case could be made for an extensive potash deposit, the depths of this deposit and the associated high temperatures (69 – 97 deg. C) are considered to be outside of the realms of feasible solution mining techniques due to problems of salt competency and reduced borehole stability with increasing temperatures of salt. This conclusion led Rowntree to relinquish his EPMs over this area in 2005.
Queensland’s Adavale Basin is located in the west central portion of the state some 650 km inland from the coast and 800 km west-northwest of Brisbane. Sediments of the Adavale Basin range in age from the Early Devonian and extend upwards into the Early Carboniferous. Deposition occurred during a gross transgressive-regressive cycle reflecting the westward advance and subsequent retreat of the sea during Devonian time. Tectonics provided a major influence on the deposition of the basin with an overall rift valley setting being interpreted as the driving force behind early basin deposition. The Mid Givetian aged Boree Salt Member is restricted to the eastern edge of the basin and was precipitated under conditions of saline reflux during tectonically controlled basin restriction. The Boree Salt conformably overlies the Bury Limestone which had been deposited under more open marine conditions. The salt body is bounded to the east by the large Warrego Fault and associated Pleasant Creek Arch. It is this Pleasant Creek Arch which was uplifted during Boree Salt Member precipitation creating the restricted marine conditions necessary for thick halite precipitation. The Boree salt grades shoreward into dolomites of the Cooladdi Dolomite to the west. The northern edge of the salt body is demarcated by the subcropping of the salt. In a southward direction, the salt is evident and appears at ever increasing depths within the eastern edge of the Adavale trough.
After the Boree Salt was precipitated, a major hiatus occurred in the Adavale Basin resulting in an uncomformable surface between the Boree Salt and the overlying Etonvale Formation. Rock units of the Etonvale Formation were deposited during a subsequent marine reinvasion as fluvial to marginal marine clastics.
Above the Adavale Basin, sediments of the Permo-Triassic Galilee Basin were deposited followed by sediments of the Eromanga Basin in the Early Jurassic to late Cretaceous. During the Cenozoic, reactivation of basement faulting resulted in structures in these overlying basins in this area. One of these structures was the target for the drilling of the Boree 1 well in the 1960’s. As mentioned previously, it is believed that post depositional salt flow occurred over a structural high fringing the Ravensbourne Uplift resulting in a buried “salt dome” structure underlying the blocks that this permit is being applied for. The overall area is currently tectonically stable.
Seismic has been used to try to delineate the boundaries of the Boree Salt. The base and top of the salt have distinctive reflectors with the basal boundary showing a clear couplet reflector due to the contrast with the underlying Bury Limestone and Cooladdi Dolomite. The upper salt boundary is not as distinctive but does show reflection from overlying carbonate and anhydrite beds. Previous work done by Radke in 2004 and 2005 resulted in the interpreted areal extent of the Boree Salt underlying and bordering this permit area to be at least 50 km2 based on seismic interpretation of existing public data. The Boree Salt thickness and areal extent appear to be easily sufficient for the development of several salt storage caverns. The main technical focus of IEC’s exploration permit tenure will be to fully and clearly delineate the thickness and extent of the Boree Salt over the permit area.
Although more investigative work needs to be performed, the Boree Salt dome located in the area of interest appears to exhibit most, if not all, of the characteristics conducive to the brining or leaching of large underground caverns for the commercial use as storage containers. Thick, tectonically stable, high purity salt domes present by far the best candidates for salt cavern storage creation and operations for the characteristics of the host salt formation determines cavern configuration design and hence the size, shape and pressure vessel integrity and strength of the cavern. Tall, slender salt caverns are often created in salt domes or anticlines. A number of liquid caverns in Gulf Coast, USA salt domes have heights of 610m and spans of 61m. A 10:1 ratio of height to span is considered to be optimal. The design and leaching of salt caverns to create a high quality underground pressure vessel is well established and is considerably less complex in dome salt formations compared to bedded salt formations. The supply of water for leaching and the disposal of the resultant brine often present a challenge, for the total quality of water required to leach a cavern in a salt formation is 7 to 10 times the cavern volume. The operation of salt cavern storage for a variety of storage purposes and cycling conditions has evolved over the past 50 years to that of an extremely safe and environmentally benign nature.
IEC is optimistic regarding the commercial viability of developing and operating salt cavern storage in the area of interest. Given the many potential storage applications, the vibrant resource based economy of Queensland in particular and Australia in general and IEC’s success developing green field gas storage projects in the past and its relationships with potential investors in and customers of underground salt cavern storage, IEC is confident that in due course the economic viability of this project will be demonstrated. While the location of this salt deposit is not ideal in terms of access to infrastructure (roads, railway, pipelines, transmission lines, etc) and access to low cost water supplies for cavern leaching, we are not discouraged by the remoteness of its location. In most OECD countries both the value for underground storage and the applications for such facilities has increased substantially over the past decade. The marketplace increasingly places a premium value on proven tools such as salt cavern storage that mitigate environmental and economic risk in a safe and reliable manner. IEC is confident that the fundamentals are sound and that the time is right for Queensland to develop Australia’s first salt cavern storage facility and business activities related thereto. IEC anticipates that it can and will develop compelling value propositions for the use of its prospective salt cavern storage facility in Queensland’s Adavale Basin that will attract long term storage customers. These prospective customers include: petroleum companies, power generators, mining companies and industrial companies.
It is important to note that the costs and benefits of salt cavern storage vary from continent to continent. Furthermore the cost of developing salt caverns varies with the depth, thickness and purity of the salt deposit. It is important to appreciate that the costs associated with the development of high cycle salt cavern gas storage in North America at this time varies from $15 to 25 million/PJ of working gas capacity while the market value for this capacity in the divestiture/acquisition game is as high as $40 million/PJ of working gas capacity. This high value for salt cavern storage in North America at this time is attributed to the volatility of the natural gas prices in that continent. While Australia does not yet have a robust spot market for natural gas, the implementation of the STTM (short term trading market) in the near future would introduce price volatility and thereby enhance the value of underground gas storage facilities.
Benefits to Queensland
It is interesting to note that Australia is a significant producer and exporter of salt products (4% of the world market in 1991) and yet has little to no experience with the leaching of salt from underground salt deposits. Unlike North America, Australia is able to harvest salt utilizing man made solar salt farms or naturally occurring sources of brine water. Other countries, such as Canada, rely on room and pillar salt mining operations or for deeper salt deposits, solution mining, to harvest both salt and potash. Canada has become a world leader in solution mining of salt and potash deposits. Most of Australia’s salt production is from the Pilbara region of Western Australia. Consequently Australia has not yet exploited the numerous economic and environmental benefits associated with the use of underground salt caverns for either temporary or permanent storage of useful commodities and wastes respectfully.
The Adavale Basin in Queensland and the Canning and Officer Basins in Western Australia appear to offer the best salt deposits in Australia for the development and operation of a salt cavern storage industry. The utilization of underground storage in Australia remains in its infancy. Several depleted hydrocarbon reservoirs have been used by Santos (Chookoo field near Ballera and the Lower Daralingie field near Moomba), Origin (at Newstaed), WAPET (Mondarra), DEVEX (Tubridgi) and TRUenergy (N. Parate) and underground storage galleries mined by Elgas in sandstone for LPG storage (Botany Bay). Underground storage is much more cost effective than above ground storage for any substantial amount of storage capacity.
The utilization of underground salt cavern storage has created substantial wealth, economic competitive advantage and environmental benefits in many regions of North America and Europe. The salt cavern storage sector of the underground storage industry in North America is an extremely vibrant and growing multi-billion dollar industry that makes a significant contribution to the economic efficiency, security of energy supply, waste disposal and enhanced environment on both a state, provincial, regional and national basis. We believe that Queensland has the salt deposit resources, an attractive regulatory and fiscal regime, and a resource based economy that would attract a significant investment in the development and operation of salt cavern storage projects. Queensland has, in our view, the potential to become a leader in Australia regarding offering services related to salt cavern storage and not only create many value adding businesses but gain a competitive advantage vis-à-vis the other regions of Australia. It has been demonstrated in Europe and in North America that underground storage in general and underground salt cavern storage in particular can and will enhance the economic efficiency and lessen the environmental impact of its mining, petroleum and power generation industries and will attract new value adding industries to the state.