Apache Makes Big Oil Find Off Western Australia

In what would be one of Australia's largest oil discoveries in decades, U.S. energy company Apache Corp. APA +0.76%  said an exploration well offshore Western Australia state had found as much as 300 million barrels of crude.

The drilling result from the Phoenix South-1 well in the offshore Canning Basin could reopen a frontier for oil exploration that some international energy companies abandoned decades earlier after wells

turned up dry.

"The oil and reservoir quality we have seen point to a commercial discovery," said Thomas E. Voytovich, a senior executive at Apache's international arm. "If these results are borne out by further appraisal drilling, Phoenix South may represent a new oil province for Australia."

Australia is in need of new sources of oil to replace fast diminishing reserves from existing fields. According to BP BP.LN -0.22%  PLC, Australia's oil production last year fell by 17% to 416,000 barrels a day—its lowest level since 1972—as conventional fields became depleted.

That is in contrast to natural gas where several big discoveries by companies including Chevron CVX +0.17%  PLC and Royal Dutch Shell RDSA.LN +0.13%  PLC have paved the way for investments totaling tens of billions of dollars in export infrastructure to feed Asian demand for cleaner-burning fuels.

Early estimates that Phoenix South-1, drilled 180 kilometers north of Port Hedland in 133 meters of water, found up to 300 million barrels of oil in place compare favorably to recent discoveries in Australia. For example, Woodside Petroleum Ltd. WPL.AU +0.75% 's 1999 Enfield discovery, which led to a wave of new drilling in the nearby Exmouth Basin, started production in 2006 with reserves of 127 million barrels of oil.

Further to the North West, Chevron's Barrow Island field has produced an estimated 322 million barrels of oil since it came online in the 1960s, according to Western Australian Government data.

Simon Andrew, an energy analyst at Perth-based broker Hartleys, said the full significance of the Phoenix South discovery won't be known for some time.

"It will take two to three months to work out the actual recoverable volumes from the discovery," he told The Wall Street Journal.

Apache said testing has confirmed at least four distinct oil "columns" in the seabed rocks ranging in thickness between 26 meters to 46 meters, with six light oil samples recovered from three intervals so far.

Apache is the operator of the WA-435-P block where the discovery was made, and owns a 40% stake in the license and the adjacent WA-437-P permit. Other investors include Carnarvon Petroleum Ltd. CVN.AU +196.30%  , a unit of Japan's JX Holdings Inc., 5020.TO +0.43%  and closely held Finder Exploration Pty Ltd.. News of the discovery led to Carnarvon's stock tripling in value Monday.

Apache said the area around Phoenix South includes several large structures, including the Roc prospect on WA-437-P, that could also contain lots of oil.

The company is planning to drill more wells next year.