Abstract The Penola Trough of the Otway Basin, South Australia, is host to five economic gas fields containing an estimated 120 bcf of original gas in place in fault-related traps. However, throughout this trough, many other fault-dependent traps contain paleocolumns or partial paleocolumns. In 2001, the Balnaves 1 well discovered a semibreached structure. This structure was originally thought to be low risk because its associated fault was optimally oriented to seal with respect to the interpreted present-day maximum horizontal stress direction. On subsequent analysis of the wellbore image data, an open conductive fracture network was observed in the seal around the main bounding fault. We propose that perturbations of the regional stress field around preexisting faults may open a fracture network in the seal. This hypothesis is tested for the Laira Formation (cap seal) using the finite-difference distinct-element method (DEM). To our knowledge, this technique has not previously been used to assess seal integrity. The DEM has been used before for estimating perturbations around faults. The current work first summarizes and expands previous investigations of the perturbations developed in the two-dimensional (2-D) (horizontal) local maximum (σ 1 ) and minimum (σ 3 ) stress magnitudes produced around a single fault, it then uses this understanding to create and assess a 2-D DEM Penola Trough model. For a single fault, the magnitude of perturbations were examined as a function of k = σ 1 /σ 3 , θ (the angle between σ 1 direction and the fault strike), friction angle Φ, and fault stiffness j kn and j ks . The magnitude of stress perturbations are highly sensitive to k , θ, and Φ, but less sensitive to fault stiffness. This insight is applied to horizontal 2-D models to identify areas of potential cap rock failure. In a 2-D study of the Penola Trough areas of high shear stress are modeled where breached hydrocarbon columns are known to occur. We interpret areas of high shear stress to be zones of fractured rock and possible cap rock failure. Predicting zones of cap rock failure using DEM models could prove to be a very useful exploration tool in locations where cap rocks are known to be brittle and have suffered recent tectonic strain.