There aren’t many exploration and production professionals in Australia who can boast the unique perspective Diana Hoff brings to the industry. Hoff, Santos’ vice president, technical, engineering and innovation, has spent significant time working Down Under and in the U.S., which serves to reinforce her knowledge of which innovations just may come in handy while exploring Australia’s often challenging terrain.

With more than 25 years of experience in the industry, working with both major and independent operators, she’s become one of the foremost authorities on drilling in Australia. At Santos, which she’s been with since 2010, she is responsible for drilling and completions, major projects, surface engineering, safety and environment.

She was at the forefront of innovation within Santos, sourcing technologies to deal with complex engineering and technical challenges of conventional and unconventional drilling.

Recently, Hoff shared her insights on the state of exploration and production in Australia with Oil and Gas Investor Australia.

Oil and Gas Investor Australia What makes Australia such a challenging, yet compelling destination for exploration and production?

Hoff What makes it compelling is that there is a vast amount of unexplored or undeveloped resources both onshore and offshore. There are a lot of challenges related to the remoteness of a lot of areas and there’s not a lot long-term development in much of the country. There are a couple of key basins that have been explored. I think it’s attractive because there is a very educated workforce, there’s a stable government and there’s an appetite overall for innovation and technology in the country.

Oil and Gas Investor Australia What is the biggest challenge facing the industry in Australia over the next five years?

Hoff The challenge on the east coast for sure is the six LNG trains that are coming online. It is also meeting the gas supply demand, both LNG offtake and the domestic market. It’s a big challenge when most of this is coming from coal seam gas and also a lot of tight sand stone and potentially shale plays. There are a lot of rocks that require a good number of wells into them and a lot of stimulation to get them to produce at a high rate.

Oil and Gas Investor Australia On the western coast?

Hoff On the western coast, it’s figuring out paths to market for a lot of the hydrocarbon that’s been discovered out there. I’m trying to understand if floating LNG is going to be a viable option in different areas. Some of the other challenges, in general, are the cost of doing business in offshore Australia. It’s certainly a higher rate than what we see elsewhere—it can be $100,000 a day higher than it is in Southeast Asia.

Oil and Gas Investor Australia What technology holds the most potential as an enabler for developments in remote locations, both onshore and offshore?

Hoff Onshore, I think it’s actually hydraulic fracturing because the wells have to be so productive in remote areas to justify pipelines and things like that. You really have to be able to stimulate your wells to get the most out of them. Offshore, we have challenges with logging while drilling. We need some high-end tools to enable that. We also have some challenges with high-pressure, high-temperature tools, so if we can get some of those in country that can help us better understand the reservoirs offshore. That would make a great difference.

Oil and Gas Investor Australia How have compliance issues affected the adoption of new technology, especially those imported from abroad?

Hoff There are a number of challenges that come into play when you’re trying to bring in technology. Some of it is that we don’t have the amount of activity level that other regions have. To bring high-end, very new technology into Australia, the unit cost is pretty significant. When you try to build rigs, for example, on the other end, there are a lot of challenges around the electrical systems and differences between North America, where many of the rigs are built, and Australia. There are also issues about what is allowed on the roads in Australia, and it varies by state. To be able to bring something into country and use it immediately is a very big challenge. There is a lot of commissioning work and inspection work to get things into country.

Oil and Gas Investor Australia What about costs? How can technology help producers offset those challenges?

Hoff Technology is going to be an enabler of driving down costs. In the onshore world, as we do more multiple well pad developments that will help drive down per the well costs. For that to happen we need to have rigs with certain capabilities, such as skidding forward and backward. We need to have better sand management – proppant management -- for fracking. I think that’s one of the biggest challenges. We’re still cutting sacks by hand on location. Some of the service providers are looking to make step change on that with conveyor systems and different silos on site for bulk storage. I think that would have a great impact for onshore.

Offshore there a lot of challenges. We can drill a well in Indonesia, for example, for $600,000 to $700,000. The same well in Australia will cost $1.1 million to $1.2 million.

Oil and Gas Investor Australia Can you compare the challenges Australian unconventional producers are facing to those faced previously in the U.S.?

Hoff In the United States unconventionals were developed in successive waves. It started with coal bed methane, which in Australia, is coal seam gas, and then it was tight sand, and then shale. In Australia, they are all hitting at once. I think that the combination of having to learn different rock types all at once, and then having the massive market change because of the LNG plants on the east coast, you go from having an environment where companies did not need to optimise a lot of processes and go flat out as hard as they could all of the time because the market just wasn’t there to having a tremendous market and trying to change your processes all at once. In the U.S., that took a lot of time, over decades. Here, we’re trying to do it all in one decade.

Oil and Gas Investor Australia Techniques for targeting unconventionals are always improving. Which techniques have shown the most promise in the Outback?

Hoff We are running a lot of 3-D seismic. I think that’s where it starts, by having a better understanding of the subsurface on the front end. The other technology we think will work well on our end is micoseismic, which gives us a better understanding of our hydraulic fracturing. The challenge is because of high temperatures, which creates difficulties running tools down hole. So we’re trying to use surface microseismic, and I think there’s a lot opportunity to develop technology in that area that will really help us understand reservoirs as we are developing them.

Oil and Gas Investor Australia Obviously, unconventionals, particular coal seam gas-to-LNG are becoming a bigger part of the Australian oil and gas sector. Your company, Santos, is right in the middle of it, but on a larger scale, how can these types of innovations help lift Australia to leader status on the world stage?

Hoff What having LNG plants does for Australia is it gives us access to international markets and higher gas prices. It is similar to what happened in the U.S. in the late 2000s. That enables operators to try new techniques and understand new rocks, such as shale and deep coals. Being able to access [international] markets enables us to drill in remote areas, such as the Northwest Territory, where some of the most highly thought of shale resources are located. We’re going to have to put in pipeline to access these resources. Once we get access to markets, pricing allows us to try different resources and develop different resources.

Oil and Gas Investor Australia Finally, what would you say are the keys to being a successful onshore operator in Australia?

Hoff I think it’s key to understand remote operations, understanding the impact of the roads and how that affects equipment and timing. It’s important to have a blend of local talent who understands the logistics, as well as the high temperature subsurface environment, and to blend them with people from other areas who have seen different ways of doing things to offset a bit of geographic isolation.

Additional reporting by Len Vermillion

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