“10% of Victoria’s Gas for 20 Years”: Lakes Blue Energy on the Wombat-5 Discovery

Lakes Blue Energy CEO Richard Ash and his new technical team explain how Wombat-5 found gas in Gippsland but damaged the reservoir while doing it, and the plan to fix it and prove a commercial flow.

A Year of Relisting and Drilling

Richard Ash last appeared on Vantage Point in July 2025, and he describes the 12 months since as interesting, to say the least. Lakes Blue has a history stretching back to the 1940s and has been listed several times. During the Victorian moratorium on drilling it went through a very difficult period and was suspended for some time.

With around 12,000 shareholders, Richard says the company was always going to relist eventually, but the circumstances had to be right.

There’s no point relisting and bearing the costs and then being delisted again.

— Richard Ash

Part of the relisting involved raising capital to drill Wombat-5. That has now been done, and the well found gas. It has not yet been flow tested, but Richard says the company is in a better position than it was a year ago.

Building the Team

One of the points discussed on the earlier episode was that the company had done everything on the smell of an oily rag. With 237 metres of gas-bearing sands now confirmed, Richard says it has to give the well every opportunity, and one person cannot be an expert in everything.

So the technical team has been expanded:

• Mike McGowan: senior technical advisor and general manager, with 30-odd years in oil and gas. He started at BP, worked for Santos and other companies around the world, and sold his own oil company in Papua New Guinea in 2022. A longstanding Lakes shareholder, he joined in January.
• John Mackintosh: a reservoir engineer who began at Santos in operations and drilling and completions, then spent 20 years with international operators and consultancies, including time in Egypt. He returned to Australia in 2020 and was asked to look at Wombat when it did not flow as expected.
• Lucas: focused on seismic work, with a lot of seismic reprocessing experience.
• A drilling and completions specialist, also named Mike, who is very seasoned.
• Tim: who has been there for the whole journey and remains part of the team.

Wombat-5: Gas Found, Formation Damaged

Richard is upfront about the difficulty of the well.

Drilling a one-and-a-half kilometer horizontal is difficult. There’s no question about that. We’re the first one to do it in Victoria.

— Richard Ash

The well got to the end, but not without problems. Richard says some suppliers did not perform as hoped, that the company is in litigation with them and that it led to substantial delays. The result is good news and bad news. The good news is that gas was found in three separate pockets. The bad news is that the formation was damaged in the process.

In simple terms, drilling fluid affected the clays in the sands, and chemical reactions formed a skin. The important detail, Richard says, is that the damage is in the sections that contain gas.

The solution is very common in the industry: perforate. Perforation drives pellets through the skin and into the formation to create open fractures that let the gas flow. Richard notes this is a massive industry with a great deal of science behind it.

There’s a solution to everything. The question is whether the engineering and the cost is worth it versus the benefit. Clearly, with the volume of gas we think it’s down there, it’s worth doing.

— Richard Ash

What “Damaged” Really Means

Simon asked John whether “damaged” is too drastic a word, since it sounds horrendous. John says it is a common engineering term, and the reservoir is not broken.

It’s mechanically damaged is what we call it.

— John Mackintosh

Work with Schlumberger on core samples and cuttings has been eye-opening, John says, and he sees that as a good thing, because the company now knows the damage mechanism and it is a fluid issue. It can be avoided in future work. Looking back at Wombat 1 to 4, he sees the same mechanism there.

Mike adds that this is not a unicorn problem unique to Lakes. Formation damage is something many companies in the industry have faced, and the question is how to get beyond it.

The Fix: Fluids First, Then Rocket Fuel

Mike sets out the remediation in two parts. The first is to establish a fluid that does not react with the clays, so the pore throats stay open. Simon asked why not perforate immediately, and Mike’s answer is that doing so with an incompatible fluid in the reservoir would trigger the same reaction in the newly opened rock.

If you rush out and perforate immediately and you have a fluid in the reservoir that is still not compatible, you’ll get literally a chain reaction.

— Mike McGowan

The second part is the perforation itself, which will be enhanced with a propellant, which Mike describes as essentially solid rocket fuel. It releases gas that energises the perforation process and pushes it much deeper into the formation. The aim is to get further beyond the damage while also exposing more new rock for the gas to flow through.

The propellant technology comes out of the US shale industry. Lakes is working with a US company, alongside an Australian perforating company, and Schlumberger is handling the fluid and core work. John says it is a multi-path plan, so it is not a one-shot attempt.

Seismic, and the Bigger Picture

The team has also commissioned a reprocessing of the Wombat 3D seismic, which was processed back in 2008. John says computing power and processing algorithms have moved on dramatically since then, and the preliminary work from US specialists looks exciting. It should give a better indication of the lateral extent and thickness of the reservoir, and it will inform the design of a new 3D survey planned for Wombat and the Trifon and Gangell area.

The numbers matter. The Wombat 2C contingent resource is about 330 Bcf, and the Trifon and Gangell area adds about 390 Bcf, taking the total towards 720 Bcf. It is located near a processing plant, which helps logistically.

The Size of the Prize

Richard says the numbers come from independent assessments in the company’s ASX releases. The 2C contingent resource is about 329 Bcf. He is careful to acknowledge risk, but the volume is large.

It can supply 10% of Victoria’s gas for the next 20 years, give or take.

— Richard Ash

He says AEMO forecasts a gas shortage in 2030, and those forecasts leave out some demand drivers, such as data centres, so the number is more meaningful than people realise.

The data centre angle came out of conversations with Development Victoria, which has its own AI data centre strategy. The biggest challenge for any data centre, Richard says, is firm energy, meaning consistent power, and gas suits that need. Wombat’s location means a data centre could sit essentially adjacent to the field. Because information given to the state government becomes public, the company put it in an ASX release.

Mike adds that the field is close to infrastructure, with both the Gemini and APA pipelines less than 20 kilometres away. He describes this as Lakes “Mark III”, and says if the well can be made to flow, it is a very good story for Victoria and for shareholders.

The Road to First Flow

At the time of recording in early August, the big milestone was testing in late August or early September, subject to regulatory approval. Mike said the design work was largely finished and the notification period to stakeholders and neighbours in the area had been completed, with the full application due to go to the regulator within days and about a couple of months expected to secure approval.

Execution itself is fairly quick. Mike says it takes a week or two to perform the work and let the well flow. The first sign will be initial indications from the well, but tight gas wells can take time to build up a head of steam. After that comes the real work of measuring stabilised flow rates and choking the well back and opening it up to look at the reservoir’s capability.

If the work went ahead in September, Mike expected meaningful results to be communicated by about November. It was not, he stressed, an extensive 12-month program. He also acknowledged that technical risk remains.

You’re dealing with something that’s one and a half kilometers under the ground, and we don’t have visibility down there. If that risk didn’t exist, it would be a slam dunk.

— Mike McGowan

On what happens if the test is successful, Richard says a development would need to be funded, and whether that is done with a partner will depend on the level of interest once the testing has proven it up.

Why the Risk Has Improved

Simon asked Richard, with the caveat that he is biased, why shareholders and potential investors should keep the faith. His answer is that the original story is intact: the horizontal well was designed to maximise the area through which gas can flow, and that is what will be tested.

Whilst the story has been extended by timeframe, the story hasn’t actually changed. And I think the risks have improved compared to when we last time we spoke.

— Richard Ash

He points to what is now known: there are 237 metres of gas sands, there is reservoir pressure data and the damage mechanism is understood. John agrees, saying the project is less risky than it was before the well was drilled.

It’s less risky now. The solution’s in the history.

— John Mackintosh

He says the history is a big advantage over a greenfield with only one well, and adds that the results fit the existing depositional model. The result highlights the incompatibility of the drilling fluids with the rock, not a problem with the gas.

Asked about the importance of an A1 team for a small-cap company, John says it matters a great deal. Schlumberger, Halliburton and Baker Hughes have networks of experts worldwide, so if they do not have the expertise in Australia they can reach someone in, say, Argentina. His own excitement comes from the approach: the right people are doing the right work, and everything is on the table with no givens. As Simon put it, it is a much more systematic and measured approach than the “drill, baby, drill” of the first episode.