A tale of two states

A drill rig in the Cooper Basin. Image courtesy of Beach Energy

A drill rig in the Cooper Basin. Image courtesy of Beach Energy

As neighbouring southern states, South Australia and Victoria share a lot in common. However, it is clear that effective gas industry governance is not a shared characteristic, with Victoria’s industry in an irresolute state and South Australia’s charging ahead.

While South Australia hosts the mighty Cooper Basin, boasting approximately 160 producing gas fields feeding into major production facilities at Moomba, just across the border in Victoria - a state with its own formidable gas reserves - onshore gas exploration is virtually non-existent.

The Victorian Legislative Council’s Environment and Planning Committee is currently conducting an inquiry into unconventional gas in the state before the government makes a decision on the future of the industry in December 2015.

The inquiry is looking into the potential benefits of unconventional gas as an energy source for the state, the potential risks involved, how the industry can co-exist with landholders and how other Australian and international jurisdictions have handled the matter.

While the inquiry is underway, the Victorian Government will continue a moratorium on all onshore gas development in Victoria which has been in place since August 2012.

The moratorium is due to remain until the inquiry is completed, with a final report scheduled for no later than 1 December 2015, while an interim report is due no later than 1 September 2015.

Victorian Minister for Industry and Minister for Energy and Resources Lily D’Ambrosio told Gas Today that “All of these measures will remain in place until the parliamentary inquiry has heard from the experts, reviewed the scientific evidence and consulted with the community.”

The final report from this inquiry will follow a very similar inquiry undertaken by the former Victorian Government, which failed to yield any impact despite recommending the development of unconventional gas in the state.

The 2013 report from the Gas Market Taskforce, led by former Howard Government minister Peter Reith, looked at issues surrounding the eastern Australian gas market, criticising scare campaigns surrounding hydraulic fracturing.

“The government is blocking a new industry being brought into existence with all the investment and jobs that go with it,” Mr Reith said in an interview with Gas Today.

NEW PROJECT HOPE
Meanwhile, there is a glimmer of hope for Victoria for new onshore gas projects, with Origin Energy proposing an onshore drilling program that will extract gas from offshore gas reservoirs to explore the Speculant prospect in Bass Strait’s Otway Basin.

The project will involve drilling two to four wells, subject to regulatory approvals, with drilling from a land base into offshore reservoirs using deviated/drilling technology, as well as the construction of two short sections
of pipeline which will be connected to an existing pipeline, allowing gas to be transported to an existing gas processing plant.

Elsewhere in Victoria, ExxonMobil subsidiary Esso Australia’s multi-billion dollar Kipper Tuna Turrum Project in Bass Strait is one of the largest domestic gas developments on the eastern seaboard.

The project, which began in 2013, completed its Turrum gas field drilling program in August 2015, drilling four gas wells and one oil well.

SOUTH AUSTRALIA “STEADFASTLY COMMITTED TO UNLOCKING FULL POTENTIAL”
Just down the road, South Australia’s approach to onshore gas development is markedly different, and is being widely praised by the industry as well as domestic and international investors.

Reiterating the SA Government’s approach to working with industry, Treasurer Tom Koutsantonis told the Australian PetroleumProduction and Exploration Association (APPEA) 2015 Conference that the government is steadfastly committed to unlocking the full potential of the state’s minerals and energy resources.

“We have long-term ambitions that look through the current cycle to the next upswing and beyond,” said Mr Koutsantonis. “Our petroleum sector has multi-billion
dollar exploration programs both onshore
and off.”

Local and international companies are planning to explore offshore in the Bight Basin, including BP with its Great Australian Bight Exploration Drilling Program in whichthe company is proposing to drill four exploration wells by the end of its three-year permit term in mid-2017.

The state’s Cooper Basin has become the most prolific onshore basin in Australia, with immense conventional reserves and shale potential that could produce natural gas for decades to come.

While Santos is the most active producer in the basin, companies including Origin Energy, Beach Energy, QGC, Drillsearch, Central Petroleum and Icon Energy are also undertaking drilling operations in the area.

THE RIGHT FRAMEWORK IN PLACE
The South Australian petroleum regulatory framework has been endorsed as one of the top three resource regulatory regimes in the world for shale and tight gas by international mining and energy law expert Dr Tina Hunter.

“In my view they are professional and have the necessary experience and processes to implement best practice in the regulation of unconventional natural gas,” Dr Hunter said.

The SA government has encouraged this by providing incentives for investment in the state, reducing petroleum retention licence fees by 25 per cent since July 2014, with plans for further reductions in 2016 and 2017, according to the Treasurer.

“Without doubt, the gas industry is going through an unprecedented period of transition, as the focus on supplying east coast markets which has underpinned the sector for decades broadens to encompass the growing demand for exports,” said Mr Koutsantonis.

“The local market needs to respond and adapt to this changed focus so that we continue to explore and develop our gas potential here in Australia to secure our own reliable energy supplies.”

SECURITY OF SUPPLY AT STAKE
With the SA government’s current framework certainly encourages investment in the state’s gas resources, the Australian Petroleum Production and Exploration Association (APPEA) has urged the Victorian Government to step on the gas.

APPEA has recommended the establishment of an independent Gas Fields Commission in Victoria, suggesting this is one such measure that could potentially open the door to onshore development in the state.

In the meantime, more than 1.8 million customers remain exposed to higher gas prices in Victoria, while SA surges ahead exploring for new gas supplies.

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