Killanoola-2 Well Drilled to 1,044m; Hydrocarbons Confirmed but Production Challenged
Red Sky Energy has completed drilling the Killanoola-2 well in South Australia, confirming hydrocarbons but facing low permeability challenges. The well is now suspended, with plans for future completion and stimulation to unlock production potential.
- Killanoola-2 well drilled to 1,044m depth and safely suspended
- Petrophysical analysis confirms hydrocarbons in Upper Sawpit Sandstone
- Low permeability and high water saturation limit current production potential
- Contingent Drill Stem Tests not conducted due to reservoir characteristics
- Plans underway for workover rig completion and stimulation subject to approvals
Drilling Completion and Reservoir Insights
Red Sky Energy has successfully completed drilling operations at the Killanoola-2 (KN2) oil appraisal well, located in South Australia's onshore Otway Basin. The well reached a total measured depth of 1,044 metres without incident and has since been cased and suspended, positioning it as a potential future producer. This milestone marks a significant step in advancing the Killanoola Oil Project, which has seen a recent uplift in estimated petroleum initially in place (PIIP) following a 3D seismic program.
Reservoir Quality and Production Challenges
Detailed petrophysical analysis of wireline logs, including gamma ray, sonic, resistivity, density, and neutron measurements, has confirmed the presence of hydrocarbons within the Upper Sawpit Sandstone formation. However, the reservoir exhibits low matrix permeability, high water saturation, and considerable shale interbedding. These factors collectively reduce reservoir connectivity and limit the well’s production potential in its current unstimulated state. As a result, Red Sky Energy has opted not to proceed with the contingent Drill Stem Tests, which are typically used to evaluate flow rates and reservoir pressure.
Strategic Next Steps and Development Outlook
With the KN2 well now suspended with production tubing in place, Red Sky Energy is focusing on planning a workover rig operation to complete both KN2 and the nearby DW1 well. The company is actively evaluating stimulation options, such as artificial lift and hydraulic fracturing, to enhance reservoir permeability and unlock commercial production potential. These plans remain subject to regulatory approval, reflecting the company’s commitment to compliance and sustainable development.
Market Position and Offtake Discussions
The Killanoola Oil Project benefits from a conditional offtake agreement with Viva Energy Australia Limited and ongoing discussions with Santos Limited regarding alternative processing arrangements at the Port Bonython facility. These commercial arrangements are critical to the project's future viability and underscore Red Sky Energy’s strategic positioning within the South Australian energy landscape.
Resource Estimates and Risk Considerations
Red Sky Energy continues to reference its previously reported Petroleum Initially In Place estimates, which remain consistent with independent assessments. These figures represent un-risked prospective resources and highlight the significant technical and commercial uncertainties inherent in early-stage oil exploration. Investors should note that the low permeability and high water saturation observed at KN2 introduce challenges that will require innovative completion and stimulation techniques to overcome.
Bottom Line?
Red Sky’s next moves on stimulation and well completion will be pivotal in determining Killanoola’s commercial future.
Questions in the middle?
- What specific stimulation methods will Red Sky pursue to improve reservoir permeability?
- How soon can the workover rig operations at KN2 and DW1 commence and what are the expected timelines?
- What are the regulatory hurdles and approval timelines for the planned stimulation activities?