ANNUAL REPORT - PEL 106 PERMIT YEAR...

A wholly owned subsidiary of Drillsearch Energy Limited

ANNUAL REPORT - PEL 106

PERMIT YEAR 2

9 OCTOBER 2009 TO 8 OCTOBER 2010

COOPER/EROMANGA BASIN SOUTH AUSTRALIA

DECEMBER 2010

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CONTENTS

Introduction ............................................................................................................................................................ 4

Permit Summary ..................................................................................................................................................... 5

Regulated Activities ................................................................................................................................................ 7

Drilling and Related Activities ............................................................................................................................ 7

Seismic Data Acquisition .................................................................................................................................... 7

Seismic Data Processing and Reprocessing ....................................................................................................... 7

Geological, Geophysical & Engineering Studies ................................................................................................. 7

Geochemical, Gravity, Magnetic and other surveys .......................................................................................... 7

Production and Processing ................................................................................................................................ 7

Pipeline Construction and Operation ................................................................................................................ 7

Preliminary Survey Activities ............................................................................................................................. 7

Compliance Issues .................................................................................................................................................. 8

License and Regulatory Compliance .................................................................................................................. 8

License Non‐Compliance .................................................................................................................................... 8

Regulatory Non‐Compliance ......................................................................................................................... 8

Compliance with Statement of Environmental Objectives ................................................................................ 8

Drilling ........................................................................................................................................................... 8

Seismic .......................................................................................................................................................... 8

Production Testing ........................................................................................................................................ 8

Management System Audits ............................................................................................................................ 11

Report and Data Submissions .......................................................................................................................... 11

Incidents .......................................................................................................................................................... 12

Threat Prevention ............................................................................................................................................ 12

Future Work Program ...................................................................................................................................... 12

Expenditure Statement ......................................................................................................................................... 13

Appendix 1 ............................................................................................................................................................ 14

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List of Figures

Figure 1. Location of PEL 106. ................................................................................................................................. 4

Figure 2. Location of the tested wells in PEL 106. .................................................................................................. 9

List of Tables

Table 1. Equitable interests blocks in PEL 106 in the beginning of this license year. ............................................. 5

Table 2. Equitable Interests blocks in PEL 106 at the end of this license year. ...................................................... 5

Table 3. Original work commitments for PEL 106, Term 2 (by license year). ......................................................... 6

Table 4. New license dates for PEL 106. ................................................................................................................. 6

Table 5. Brownlow‐1 and Canunda‐1 production testing results. ....................................................................... 10

Table 6. List of the reports and data submitted in Permit Year 2, Term 2. .......................................................... 11

Table 7. Expenditure statement for the Permit Year 2, Term 2 . ......................................................................... 13

INTRODUCTION

Petroleum Exploration License (PEL) 106 is situated on the south‐western margin of the Patchawarra Trough, one of the major depocentres in the South Australian portion of the Cooper Basin. PEL 106 covers an area of approximately 500 square kilometres.

The permit was granted to Great Artesian Oil and Gas Limited (a wholly owned subsidiary of Drillsearch Energy Limited) on 9 April 2003 and renewed on 25 September 2008 for a further five years.

This report details the work conducted during License Year 2 from 9th October 2009 to 8th October 2010.

Figure 1. Location of PEL 106.

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PERMIT SUMMARY

The working interests in PEL 106 as at the end of the reporting period were:

Great Artesian Oil and Gas Limited (GAOG) ‐ 100%

Beach Energy Limited, Traditional Oil Exploration N.L. (a wholly owned subsidiary of Bandanna Energy Limited), Everdue P/L and Kompliment Pty Ltd (both wholly owned subsidiaries of Blue Energy Limited), Magellan Petroleum Limited and Rawson Resources Limited held equitable interests in the portions of PEL 106 during this license year. Drillsearch executed two sales agreements, one with Bandanna Energy Limited, and second one with Magellan Petroleum Limited, to purchase their interest in PEL 106. Everdue P/L and Kompliment Pty Ltd have lost their interest in the blocks due to not fulfilling their commitments. Table 1 shows the equitable interest blocks in PEL 106 before the sale and Table 2 ‐ after the sale.

Table 1. Equitable interests blocks in PEL 106 in the beginning of this license year.

Holder Nature of Equitable Interest Held

Beach Farmin Block Great Artesian Oil & Gas P/L – 50%Beach Petroleum Ltd – 50%

Smegsy Block Great Artesian Oil & Gas P/L – 75%Traditional Oil Exploration P/L – 25%

Rossco Block Great Artesian Oil & Gas P/L – 50%Kompliment P/L – 37.5% Traditional Oil Exploration P/L – 12.5%

Paprika Block Great Artesian Oil & Gas P/L – 50%Everdue P/L – 37.5% Traditional Oil Exploration P/L – 12.5%

Udacha Block

Great Artesian Oil & Gas P/L – 32.5%Magellan Petroleum P/L – 30.0% Beach Petroleum Ltd – 15% Traditional Oil Exploration P/L – 12.5% Rawson Resources Ltd – 10%

Table 2. Equitable Interests blocks in PEL 106 at the end of this license year.

Holder Nature of Equitable Interest Held

Beach Farmin Block Great Artesian Oil & Gas P/L – 50%Beach Petroleum Ltd – 50%

Smegsy Block Great Artesian Oil & Gas P/L – 100%

Rossco Block Great Artesian Oil & Gas P/L – 100%

Paprika Block Great Artesian Oil & Gas P/L – 100%

Udacha Block Great Artesian Oil & Gas P/L – 75%Beach Petroleum Ltd – 15% Rawson Resources Ltd – 10%

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The work program and original license dates for this term are outlined in Table 3.

Table 3. Original work commitments for PEL 106, Term 2 (by license year).

License Year License dates Minimum Work Program Year 1 09/10/2008 – 08/10/2009 Geological and Geophysical Studies Year 2 09/10/2009 – 08/10/2010 Geological and Geophysical Studies Year 3 09/10/2010 – 08/10/2011 Geological and Geophysical Studies Year 4 09/10/2011 – 08/10/2012 Geological and Geophysical Studies Year 5 09/10/2012 – 08/10/2013 Drill one well and Geological and Geophysical Studies

Two exploration wells were drilled in October – November 2008 (License Year 1), satisfying the Year 5 drilling commitment.

There has been one period of suspension applying to PEL 106 in this permit year.

• In September 2010 PIRSA granted a five‐month suspension / extension of the License Term and Year for the period from and including 9 October 2010 to 8 March 2011. The term of the license was also extended to 8 March 2013.

Drillsearch has also applied and was granted another 6‐month suspension/extension period, which affects the next permit year.

• In December 2010 PIRSA granted a six‐month suspension / extension of the License Term and Year for the period from and including 9 March 2011 to 8 September 2011. The term of the license was also extended by six month.

Both suspension periods were due to the lengthy delays and uncertainties in being able to undertake drilling, seismic acquisitions and other activities in the Copper Eromanga Basin, these delays resulting from extensive flooding in the basin during this year. The new permit dates are outlined in the table below (Table 4).

Table 4. New license dates for PEL 106.

License Year License dates Minimum Work Program Year 1 09/10/2008 – 08/10/2009 Geological and Geophysical Studies Year 2 09/10/2009 – 08/10/2010 Geological and Geophysical Studies Year 3 09/10/2010 – 08/10/2012 Geological and Geophysical Studies Year 4 09/10/2012 – 08/10/2013 Geological and Geophysical Studies Year 5 09/10/2013 – 08/10/2014 Drill one well and Geological and Geophysical Studies

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REGULATED ACTIVITIES

Pursuant to Regulation 33(2)(a) under the Act, the following regulated activities were conducted by Drillsearch Energy Limited in PEL 106.

DRILLING AND RELATED ACTIVITIES

No wells were drilled during the permit year.

SEISMIC DATA ACQUISITION

No seismic was acquired in PEL 106 during this permit year.

SEISMIC DATA PROCESSING AND REPROCESSING

No seismic data was processed or reprocessed during this permit year.

GEOLOGICAL, GEOPHYSICAL & ENGINEERING STUDIES

Technical studies during this permit year were directed toward the testing of Canunda‐1, Brownlow‐1, Middleton‐1 and Udacha‐1 wells. EPT test was conducted at Brownlow‐1 well in February and May 2010. Static gradient test was conducted at Udacha‐1 well in August 2010. EPT test was conducted at Canunda‐1 well in June and July 2010, but was interrupted by flooding. The testing of Canunda‐1 well is expected to resume once the flooding declines.

GEOCHEMICAL, GRAVITY, MAGNETIC AND OTHER SURVEYS

No surveys were conducted in this permit year.

PRODUCTION AND PROCESSING

There were no production or processing activities in the permit within this permit year (except the production testing mentioned above).

PIPELINE CONSTRUCTION AND OPERATION

No construction of pipelines or related facilities was conducted during the permit year.

PRELIMINARY SURVEY ACTIVITIES

There were no Preliminary Survey Activities on PEL 106 during this permit year.

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COMPLIANCE ISSUES

LICENSE AND REGULATORY COMPLIANCE

Pursuant to Regulations 33(2) (b) & (c), an annual report must include:

"a report for the year on compliance with the Act, these regulations, the license and any relevant statement of environmental objectives;” and “a statement concerning any action to rectify non‐compliance with obligations imposed by the Act, these regulations or the license, and to minimise the likelihood of recurrence of any such non‐compliance.”

There were no instances during Year 2 of the PEL 106 License in which the Joint Venture failed to comply with either the requirements of the License, the Regulations of the 2000 Petroleum Act, or the objectives of the SEOs.

LICENSE NON‐COMPLIANCE

There were no instances of license non‐compliance arising from operations in PEL 106 during the permit year.

Regulatory Non‐Compliance

There were no instances of regulatory non‐compliance arising from operations in PEL 106 during this permit year.

COMPLIANCE WITH STATEMENT OF ENVIRONMENTAL OBJECTIVES

Drilling

No wells were drilled in PEL 106 during this permit year.

Seismic

No seismic surveys were conducted in PEL 106 during this permit year.

Production Testing

Production testing operations carried out on wells in PEL 106B during the reporting period, 9th October 2009 – 8th October 2010, are summarized below. The locations of these wells are shown on the attached image below.

Figure 2. Location of the tested wells in PEL 106.

Middleton‐1 & Udacha‐1

Static gradient surveys were conducted with memory pressure/temperature gauges on slickline in these wells (Middleton‐1 in June 2010, Udacha‐1 in August 2010). No changes were made to the downhole configuration. These surveys were conducted to determine reservoir pressures after long‐term build‐up. Middleton‐1 and Udacha‐1 were produced on Extended Production Test with downhole monitoring of pressure build‐up in September and October 2006. These static gradient surveys represent the first downhole pressure monitoring of these wells since 2006.

Brownlow‐1

An extended production test was completed at Brownlow‐1. During testing the well was produced through a multi‐phase separator with gas flared and condensate exported via truck to Moomba. Downhole memory pressure/temperature gauges were installed during flow‐testing and pressure build‐up. This test was

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commenced on 30th January 2010, but due to rain and associated road closures testing was delayed for a number of months. Testing re‐started 2nd May 2010 and the well was flowed for 13 days.

Canunda‐1

An extended production test at Canunda‐1 was commenced on 17th May 2010. Downhole memory pressure/temperature gauges were installed during flow‐testing and pressure build‐up. During testing the well was produced through a multi‐phase separator with gas flared and condensate exported via truck to Moomba. Numerous weather‐related delays saw testing drawn out until September 2010, when a slickline tool string became lodged in the production tubing. A workover was required to restore wellbore access before testing could be completed.

The volumes of oil, gas and water produced at these wells during the testing operations are specified in Table 5.

Well Oil (cubic metres)

Gas (cubic metres)

Water (cubic metres)

Brownlow‐1 193 4.392 M 49

Canunda‐1 824 2.128 M 68

Table 5. Brownlow‐1 and Canunda‐1 production testing results.

Government approval for these operations was conditional on the commitment of the operator, Beach Energy, to achieving the objectives defined in the their “Statement of Environmental Objectives for Production Operations in the Cooper Basin“.

Operator's strategies for achieving each of the SEO objectives during these production testing operations are outlined in the Appendix .

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MANAGEMENT SYSTEM AUDITS

Pursuant to Regulation 33(2) (d) under the Act, an annual report must include:

“a summary of any management system audits undertaken during the relevant license year including information on any failure or deficiency identified by the audit and any corrective actions that has, or will be taken”.

No management system audits were undertaken during this permit year in relation to exploration activities in PEL 106.

REPORT AND DATA SUBMISSIONS

Pursuant to Regulation 33(2) (e) under the Act, an annual report must include:

“a list of all reports and data relevant to the operation of the Act generated by the licensee during the license year”.

A list of the reports submitted to PIRSA during this permit year is provided in Table 6.

Table 6. List of the reports and data submitted in Permit Year 2, Term 2.

Description of Report/Data Date Due Date Submitted Compliant / Non‐

Compliant

Canunda 1 down hole diagram 25 August 2010 23 July 2010 Compliant

Brownlow 1 down hole diagram 27 July 2010 23 July 2010 Compliant

Quarterly cased‐hole well activity report 30 October 2009 27 October 2009 Compliant

Quarterly cased‐hole well activity report 31 January 2010 29 January 2010 Compliant

Quarterly cased‐hole well activity report 30 April 2010 28 April 2010 Compliant

Quarterly cased‐hole well activity report 31 July 2010 23 July 2010 Compliant

Quarterly cased‐hole well activity report 30 October 2010 28 October 2010 Compliant

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INCIDENTS

Pursuant to Regulation 33(2) (f), an annual report must include:

“in relation to any incidents reported to the Minister under the Act and these Regulations during the relevant license year – (i) an overall assessment and analysis of the incidents, including the identification and analysis of any trends that have emerged; and (ii) an overall assessment of the effectiveness of any action taken to rectify non‐compliance with obligations imposed by the Act, these regulations or the license, or to minimise the risk of recurrence of any such non‐compliance”.

There were no reportable incidents arising from the exploration operations undertaken on PEL 106 during this permit year.

THREAT PREVENTION

Pursuant to Regulation 33(2) (g) under the Act, an annual report must include:

“a report on any reasonably foreseeable threats (other than threats previously reported on) that reasonably present, or may present, a hazard to facilities or activities under the license, and a report on any corrective action that has, or will be taken”.

Flooding was the main issue in this permit year. Any activities were cancelled or postponed if the weather did not the work to be carried out safely.

FUTURE WORK PROGRAM

Pursuant to Regulation 33(2) (h) under the Act, an annual report must include:

“unless the relevant license year is the last year in which the license is to remain in force – a statement outlining operations proposed for the ensuing year”.

Drillsearch intends to continue the well testing and geological studies in PEL 106. The JV is planning to further develop the Brownlow and Middleton fields. There are also plans for a pipeline from the Middleton and Brownlow fields to Moonanga.

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APPENDIX 1

ACHIEVEMENT OF ENVIRONMENTAL OBJECTIVES DURING THE

EXTENDED PRODUCTION TEST ON BROWNLOW - 1 AND CANUNDA - 1, PEL 106

TESTING PERIODS : Brownlow-1 : EPT initial period : 30/1//10 – 2/2/10 ; resumed and was completed 2/5/10 – 15/5/10.

Canunda-1 : EPT commenced on 17/5/10, but due to on‐going road access restrictions, the well was

shut in in September 2010, awaiting a workover rig before testing could be completed.

Objectives and Assessment Criteria1

1 Assessment criteria have been developed to be “black and white”. Professional judgement is required to assess whether non‐compliance is minor or major. It is necessary to ensure that adequate information is available to enable this judgement to be made.

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Objective Goal Guide to How Objectives can be Achieved

Assessment Criteria Performance Against Objectives

1. To avoid unnecessary disturbance to 3rd party infrastructure, landholders or land use

1.1 To minimise disturbance or damage to infrastructure / land use and remediate where disturbance cannot be avoided

Timely notification to adjacent landholders / 3rd party prior to & during new or significant works. Procedures in the POM, EMS and PIRSA guidelines address removal of waste products, re-instatement of soil profiles and rehabilitation. Incident reports

Where disturbance is unavoidable or accidental, infrastructure or land use is restored to as is reasonably appropriate to the original undisturbed condition or as agreed with the landholder

No disturbance or damage to infrastructure / land use arising from the EPT operations at Brownlow or Canunda.

1.2 To minimise disturbance to landholders

Records of communications with adjacent landholders / 3rd parties Record of disturbance management through appropriate documentation

No unresolved reasonable landholder/3rd party complaints Landholder activities not restricted or disturbed as a result of activities unless by prior arrangement

There are no occupied dwellings within 10 kms of either the Brownlow or Canunda fields.

2. To maintain soil stability / integrity

2.1 To remediate erosion as a result of production operations in a timely manner

Inspections undertaken as part of regular operations or following specific works or following significant storm events to look at evidence of erosion, subsidence, vegetation loss & compare to adjacent land Incidents or environmental issues (e.g. erosion, weeds, spills, vegetation death) reported/actioned via the Incident Register, Environmental Checklists or the Action Item Register Preventative measures implemented and monitored in susceptible areas (eg. monitor for salinisation/erosion effects)

The extent of soil erosion is consistent or less than surrounding land

Extensive ongoing rains throughout the production testing period caused damage to access roads which required repairs. No traffic was permitted on the roads when they were saturated, to ensure disturbance was minimised to the soil integrity beneath.

2.2 To prevent soil inversion Inspections undertaken as part of regular operations to look for soil discolouration and the success of vegetation return as an indicator Contractor to indicate top soil/subsoil are stockpiled separately and soil profiles appropriately reinstated following the rehabilitation of earthworks/excavations

Vegetation cover is consistent with surrounding land No evidence of significant subsoil on surface (colour)

Topsoil was stockpiled when the sites were originally cleared of vegetation for the drilling operations. Rehabilitation of the Brownlow and Canunda production sites will be undertaken when production ceases.

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2.3 To minimise and remediate soil disturbance

Restrict activities (including vehicle access) to production areas and associated infrastructure and easements Minimise area required for safely undertaking activities in accordance with procedures Planning and assessment of proposed activities to minimise impact Design and construct road with drainage features (e.g. culverts and off takes) to minimise erosion and sedimentation Rip areas of compacted soil (except on gibber plains and tableland environments Restored borrow pits have topsoil / overburden replaced and pit re-profiled where necessary to prevent erosion Contractor to indicate that soil profiles appropriately reinstated following the rehabilitation of earthworks/excavations

No production activities undertaken on salt lakes, steep tableland land systems or wetlands land systems (as defined in the EIR) Abandoned areas (e.g. borrow pits) are remediated and rehabilitated to be reasonably consistent with the surrounding area 0, +1 or +2 GAS criteria for borrow pit construction and rehabilitation are attained (Appendix B)

All vehicle movements are restricted to the designated access roads and the production facilities areas. Brownlow and Canunda production sites and access tracks are located in dunefield type environments. Clay sheeting applied to the surface on the access roads minimises disturbance to the soil beneath. No significant drainage channels were traversed by the access road to the production sites. Rehabilitation of the Brownlow and Canunda production sites and access tracks will be undertaken in consultation with the landowner when production ceases.

3. To minimise disturbance to native vegetation and native fauna

3.1 To maintain regrowth of native vegetation on reinstated areas to be consistent with surrounding area

Disturbance management to facilitate regrowth in rehabilitated areas Follow-up rehabilitation work was undertaken where natural regeneration was inadequate

Species abundance and distribution on the reinstated areas was consistent with the surrounding area Note: assessment of the consistency with surrounding areas will take into account that regrowth is a time and rainfall dependent process 0, +1 or +2 GAS criteria for borrow pit construction and rehabilitation are attained (Appendix B)

Rehabilitation of the Brownlow and Canunda production site will include reestablishment of the topsoil to ensure regrowth of the native vegetation .

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3.2 To minimise additional clearing of native vegetation as part of production activities

Planning and assessment of proposed activities to minimise impact which may include consultation with Native Vegetation Council Avoid significant or priority vegetation and ensure proposed routes have been scouted for significant vegetation and wildlife habitats by appropriately trained and experienced personnel Use existing cleared areas for laydowns and turn-arounds Consideration of sensitive vegetation during vegetation trimming and / or clearing activities Vegetation trimmed rather than cleared where possible Minimise area required for safely undertaking activities in accordance with procedures

Vegetation clearing is limited to previously disturbed areas or areas assessed to be of lowest sensitivity No rare, vulnerable or endangered flora removed without appropriate permits No production activities undertaken on salt lakes, steep tableland land systems or wetlands land systems (as defined in the EIR) 0, +1 or +2 GAS criteria for borrow pit construction and rehabilitation are attained (Appendix B)

No additional native vegetation was cleared during this reporting period.

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3.3 To achieve a significant environmental benefit for native vegetation clearance

Work (or payment to Native Vegetation Fund) undertaken to achieve a significant environmental benefit for native vegetation clearance, as required by Regulation 5(1)(zd) of the Native Vegetation Regulations 2003 Significant environmental benefit requirement either: determined using the “Methodology for

calculating total SEB requirements” outlined in the Guidelines2, or

negotiated with the Native Vegetation Council where SEB calculation differs from the standard methodology in the Guidelines. (Note: The Guidelines have provision for case-by-case assessment of significant environmental benefit by the NVC in some circumstances e.g. where SEB capping or additional mitigation measures apply)

Significant environmental benefit for native vegetation clearance approved by PIRSA (where delegated authority applies) or Native Vegetation Council Significant environmental benefit obligation satisfied / implemented

2 Guidelines For a Native Vegetation Significant Environmental Benefit Policy For the clearance of native vegetation associated with the minerals and petroleum industry

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3.4 To ensure production activities are planned and conducted in a manner that minimises impacts on native fauna

Planning and assessment of proposed activities to minimise impact In event of earthworks, open trenches are monitored daily Utilise trench plugs and fauna ladders to facilitate movement of fauna out of and across open trenches No feeding of wildlife Positioning of facilities and infrastructure to minimise impacts on fauna habitat

Vegetation clearing is limited to previously disturbed areas or areas assessed to be of lowest sensitivity No rare, vulnerable or endangered fauna removed without appropriate permits 0, +1 or +2 GAS criteria for borrow pit construction and rehabilitation are attained (Appendix B) Native fauna casualties are restricted to as low as reasonably practical

No record of rare, vulnerable or endangered fauna in this area.

3.5 To minimise disturbance of aquatic habitats (specifically wetlands, permanent waterholes and flowing water courses)

Obtain regulatory approval prior to undertaking disturbance in aquatic habitat (contact should be initially made with PIRSA during the planning process) Planning and assessment of proposed activities to minimise impact

Works in aquatic habitats (e.g. flowing watercourses) has been approved by PIRSA

Brownlow and Canunda sites are at least 15 kms from the nearest significant watercourse ( main channel of the Cooper Creek ) which flows only during major flood events ( 1 in 5 years )

4. To prevent the introduction or spread of weeds, pathogens and pest fauna

4.1 To ensure that weeds, pathogens and pest fauna are controlled at a level that is at least consistent with adjacent land

Regular patrols undertaken to look for evidence of weeds on production site and adjacent land (if weeds on production facility or easement but not adjacent land must implement control to prevent spread) Records of outbreaks found, weed control activities and photo-monitoring of significant outbreaks Undertake vehicle and equipment washdown before entering Cooper Basin or after operating in areas of known weed infestations

The presence of weeds and pathogens was consistent with or better than adjacent land No new outbreak or spread of weeds reported

No new outbreak or spread of weeds was reported.

5. To minimise the impact of the production operations on water resources

5.1 To maintain current surface drainage patterns

Regular patrols undertaken to look for evidence of erosion, abnormal vegetation growth or death Observations are also to be undertaken following significant storm events

For excavations, surface drainage profiles restored to as is reasonably consistent with surrounding area For existing easements, drainage is maintained similar to pre-existing conditions

There are no water courses in the close vicinity of the Brownlow or Canunda sites, nor crossing the access roads to these sites.

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5.2 To minimise impact to aquifers / groundwater volumes and flow patterns

The volume/flow of water extracted is monitored and recorded Water usage is to be reviewed annually and management strategies implemented to reduce overall water usage where practical

Volume of water produced recorded No uncontrolled flow to the surface (i.e. no free flowing bores) Note: the drilling and well operations SEO provides detail on aquifer issues

The volume of water extracted in the production operations is monitored and recorded.

6. To avoid land or water contamination

6.1 To prevent spills occurring and if they occur minimise their impact

All production facilities and flowlines are designed and constructed in accordance with relevant standards Containment of all hazardous substances including hydrocarbons and liquid waste in appropriate vessels and bunds Tanker load-out in lined area, with appropriate bunding to contain spills Roads and causeways designed to minimise risk of vehicle accident and appropriate safety signage installed (e.g. at access to public roads) Fuel and chemical handling and emergency response procedures included in staff training, implemented and reviewed periodically Transport procedures and restrictions to achieve compliance with POM and EMS (including no transport in wet conditions and no wet wheel fording) Implement POM procedures for temporary product storage pits Prevention program including inspection, maintenance and pigging where appropriate Patrols to look for evidence of soil discolouration, vegetation or fauna death Production operations will cease in event of flood inundation. In floodplain land systems when flooding of the facility is imminent, the following will be

No evidence of any spills or leaks to areas not designed to contain spills In the event of a spill, the spill was: Contained Reported Cleaned-up Cause investigated and

corrective and/or preventative action implemented

Compliance with the Environment Protection Act, Australian Standard 1940 and the Australian Dangerous Goods Code

No spills of hydrocarbon were recorded at either of the production testing sites at Brownlow or Canunda.

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Objective Goal Guide to Assessment Criteria Performance Against Objectives

How Objectives can be Achieved

undertaken: Storage tanks and above-ground

flowlines drained, purged and filled with water to reduce buoyancy

Interceptor pit skimmed to remove oil Fuel tanks drained, engines and all

hydrocarbons (e.g. fuel and lubricants) removed off-site

Fencing of contaminated areas if threat is posed to stock or wildlife Incident record system (preventative and post incident review)

6.2 To remediate and monitor areas of known contamination arising from production activities (salinisation, hydrocarbons, other production chemicals)

Active remediation methods implemented where it is determined that contamination is spreading or level of contamination is not decreasing Use of groundwater monitoring bores where there is an identified risk to groundwater. The number and positioning of monitoring bores will be in accordance with relevant industry practice to ensure adequate coverage of any potential underground water contamination and movement. Use of soil farms for remediation where appropriate

Contamination restricted to known areas and remediation strategies investigated and implemented where practical Level of hydrocarbon contamination continually decreasing, ultimately to meet Environment Protection Authority (EPA) guidelines3

3 Soil Health Index (SHI) study is currently being undertaken by Santos, in consultation with PIRSA and EPA. The results of this study will provide a proforma for establishing site‐specific bench marks for soil remediation.

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6.3 To ensure that rubbish and waste material is disposed of in an appropriate manner

Minimise generation of waste where practicable Provide suitable covered bins for the collection and storage of wastes and collect all waste in one area at each camp site Prevent wildlife accessing refuse materials Design and operation of any domestic waste disposal facility in accordance with EPA licence and guidelines Regular patrols undertaken to look for evidence of rubbish, spills (soil discolouration) Appropriately licensed contractors used for any hazardous waste disposal and records are maintained for all hazardous waste disposal All transported waste is adequately secured to the vehicle

No evidence of rubbish or litter on easements or at facilities No evidence that waste material is not contained and disposed of in accordance with Beach approved procedures Evidence of waste tracking certificates for prescribed wastes Evidence of compliance with any waste disposal licence conditions (e.g. EPA permits)

All waste material was disposed of in accordance with Beach approved procedures.

6.4 To prevent impacts as a result of hydrotest water and waste water (e.g. washdown water) disposal

Water disposed of in a manner that prevented discharge or runoff to watercourses or environmentally sensitive areas Water discharged onto stable ground, with no evidence of erosion as a result of discharge Records on source of water and discharge method/location Use of biocides and toxic chemicals are kept to a minimum and where practicable UV-degradable biocides (e.g. TPHS) shall be used Appropriate assessment of hydrostatic test water quality to determine disposal method Inspection of water disposal sites for evidence of water entering a watercourse or environmentally sensitive area

No evidence of impacts to soil, water and vegetation as a result of water disposal (i.e. soil erosion, dead vegetation, water discoloration)

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6.5 To ensure the safe and appropriate disposal of grey water (sullage, sewage)

Compliance with the relevant local government regulations or relevant health and sanitation regulations Wastewater disposal is governed by the Public and Environmental Health (Waste Control) Regulations 1995 (which require that the waste water disposal system must either comply with the Standard for the Construction, Installation and Operation of Septic Tank Systems in SA or be operated to the satisfaction of the Department of Health) Treated sewage wastewater disposed of onto land in accordance with Department of Health Regulations.

Wastewater disposed of in a manner that minimises risk to the environment and public health Compliance with Environment Protection Act

Grey water was disposed of in a safe and appropriate manner during the EPT operations at Brownlow and Canunda.

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6.6 To minimise impacts as a result of produced formation water treatment and disposal and restrict to defined areas

Produced formation water treatment and disposal in accordance with Beach approved procedures in POM and EMS Site ponds appropriately 4 to minimise potential impacts Fence contaminated areas if threat is posed to stock or wildlife Monitor evaporation pond water and sludge annually Target level of TPH for design purposes in lined interceptor ponds should be 50-100 mg/L Monitor ponds for surrounding upwelling of PFW Undertake appropriate water quality monitoring where shallow groundwater exists in the vicinity of PFW ponds Records of volumes of produced formation water maintained and reported annually

Water monitoring results indicated levels of Total Petroleum Hydrocarbons (TPH) below 30mg/L in unlined holding ponds and 10mg/L in freeform disposal/evaporation ponds. No evidence of overflow of product from interceptor pit No evidence of hydrocarbon contamination immediately adjacent to bunded ponds

As the Brownlow and Canunda wells are primarily gas producers , only relatively minor amounts of water were produced during these testing operations. This water was diverted into the sump pits that had been constructed at each site during the initial drilling operations. The sump pits subsequently dried out through evaporation.

6.7 To minimise impacts as a result of land treatment units and restrict to defined areas

Land treatment areas constructed and operated in accordance with procedures Records of soil added to land treatment areas to be maintained and reported annually (including quantity, location of source) Monitoring of surrounding soil and groundwater for contaminants annually as required by licence Monitoring and reporting of remediation

Periodic reports as required detail quantity, level of contamination and proposed ongoing operation of the LTU

There are no land treatment units at either the Brownlow or Canunda production sites. In the event that soil becomes contaminated, it is either treated in situ or taken to a registered soil treatment area.

4 Appropriately manage means to take into consideration and assess relevant environmental factors (including location of surface water, shallow groundwater, potential flooding, location of vegetation, etc.) and take measures to reduce the potential impact on these factors through the use of best practice.

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7. To minimise the risk to public health and safety

7.1 To adequately protect public safety during normal production operations

Risk Assessments and inspections of facilities Use of signage, bunting and traffic management practices to identify all potentially hazardous areas Records of regular emergency response training for employees and review of procedures Incident record system (preventative and post incident review) Development, implementation and periodic review of Emergency Response Plan (ERP) All production facilities and flowlines are designed and constructed in accordance with relevant standards Safety, testing, maintenance and inspection procedures are implemented Personnel are trained to supervise and instruct individuals entering area to conduct work Safe work permits must be obtained to ensure only individuals with proper clearance can conduct works

No injuries or incidents involving the public Demonstrated compliance with relevant standards Emergency procedures implemented and personnel trained

There were no incidents of risk to public health and safety during the EPT operations at Brownlow or Canunda.. The haul road to the Brownlow and the Canunda facilities is not available for use by the public.

7.2 To avoid fires associated with production activities

Incident record system (preventative and post incident review) Regular fire safety and emergency response training for all operations personnel and review of procedures Established procedures for minimising fire risk during operations All production facilities are designed and constructed in accordance with relevant standards Appropriate fire fighting equipment on site

No uncontrolled operations related fires Emergency procedures implemented and personnel trained

No fires occurred at either production testing site during the reporting period.

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7.3 To prevent unauthorised access to production facilities

Use of signage, bunting to identify all potentially hazardous areas Communications with landholders All reports of unauthorized activity are reported and investigated

No unauthorised activity

There were no incidents of unauthorised entry to either the Brownlow or Canunda facilities during the periods of production testing..

8. Minimise impact of emergency situations

8.1 To minimise the impact as a result of an emergency situation or incident

Incident record system (preventative and post incident review) Emergency response trials and associated documentation Records of regular emergency response training for all personnel and review of procedures

Emergency response procedures are effectively implemented in the event of an emergency Emergency response exercises are aligned with credible threats and consequences identified in the risk assessment

No emergency situations arose at the Brownlow or Canunda facilityies during the reporting period. Beach HSE system includes periodic simulation of Emergency situations at production facilities.

8.2 To restore any damage that may occur as a result of an emergency situation

Refer to previous criteria (Objective 1, 2, 3 & 6)

Refer to previous criteria (Objective 1, 2, 3 & 6)

9. To minimise noise due to operations

9.1 To take reasonable practical measures to comply with noise standards

Incident record system (preventative and post incident review) Monitoring results, where deemed necessary (e.g. frequent complaints)

Operational activities have taken reasonable practical measures to comply with noise regulations, under the Environment Protection Act 1993 No unresolved reasonable complaints

Brownlow and Canunda facility is at least 10 kilometres from the nearest dwelling.

10. To minimise atmospheric emissions

10.1 To minimise uncontrolled atmospheric emissions

Conduct all production activities in accordance with procedures Identify and implement strategies to minimise volumes if needed

Reasonable practical measures implemented in design and operation to minimise emissions

Sources of atmospheric emissions were limited to the diesel engines operating the testing equipment.

10.2 To minimise controlled atmospheric emissions

Conduct all production activities in accordance with procedures Identify and implement strategies to minimise volumes if needed Record and report annual emission volumes

Reasonable practical measures implemented in design and operation to minimise emissions Annual reporting includes atmospheric emissions data

Flare testing was undertaken at both the Brownlow and Canunda fields in accordance with industry standard operating procedures.

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10.3 To minimise the generation of dust.

Incident record system (preventative and post incident review) Compliance with procedures (vehicle movement, dust suppression, etc.)

No reasonable complaints received No dust related injuries recorded

Brownlow and Canunda facilities are further than 10 kms from the nearest dwelling. In addition, there are no dwellings along the access routes to these facilities

11. To adequately protect cultural heritage sites and values during operations and maintenance

11.1 To ensure that identified cultural sites are not disturbed

Consultation with relevant heritage groups if operations occurring outside known surveyed areas Surveys / cultural heritage monitoring before excavations Records of site locations within information systems Site examined by relevant aboriginal claimant group for cultural heritage material prior to work on areas not previously cleared

Proposed construction areas and access tracks surveyed by relevant cultural heritage/ Native Title group Any new sites identified are recorded and reported to appropriate authority No impact to identified sites without approval under the Aboriginal Heritage Act 1998 or the Heritage Places Act 1993 0, +1 or +2 GAS criteria are obtained for borrow pit construction and restoration, as listed in Appendix 2

A scouting team consisting of representatives of the Dieri people, conducted Work Area Clearance surveys over the Brownlow and the Canunda sites prior to the commencement of the drilling operations.

ANNUAL REPORT - PEL 106 PERMIT YEAR...

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