Skip to main content

Australian natural gas: part one

Hydrocarbon Engineering,


Australia is a mature economy and a member of the Organisation for Economic Cooperation and Development (OECD), yet its proximity to Asia has linked its economy to the region. This has had profound impacts on the development of Australian energy resources, which are abundant and diverse. The majority of the oil and natural gas resources, however, are located far from the centres of population, creating the need for extensive transport infrastructure. In the case of natural gas, the demand centres are so far distant that most current investments are export oriented. Without the export markets of Asia and the Pacific, in fact, most of Australia's natural gas reserves would not be developed at all. The energy demand boom in Asia caused a massive increase in exploration and development in Australia. But downturns affect Australia quickly as well. Now, with the recent weakness in oil prices and the slowdown in global demand growth, a note of caution has crept into the Australian oil and gas sector.

The resource base: natural gas to the forefront

Australia is rich in energy resources, and it is unique among the OECD countries because of its status as a major exporter of energy. However, the types and locations of the resources are often a mismatch with Australia's population centres and the types of energy desired.

Coal supplies are abundant in Australia, and the country is a major consumer, but environmental concerns have placed a lid on growth of coal consumption. According to BP, Australia's coal consumption fell from a peak of 55.4 million toe to 45 million toe in 2013. The country is the world's second largest exporter of coal. Much of the coal exports go to China. China's burgeoning coal consumption is creating environmental havoc, and the Chinese government is trying to slow the demand growth for coal by promoting natural gas production and imports.

Australia is a significant producer of petroleum, but its proven reserves base is limited, approximately 4 billion bbls according to BP, and 1.19 billion bbls according to Oil and Gas Journal (OGJ). This represents only 0.2% of global reserves, according to the BP estimate. Production could be extended, however. The US Energy Information Administration (EIA) believes that Australia holds 18 billion bbls of shale oil or light tight oil reserves. Crude production has been sliding downwards, falling from 499 000 bpd in 2001 - 2002 to 226 000 bpd in 2013 - 2014. Naturally occurring LPG production was approximately 80 000 bpd from 2001 through 2006, and it has settled to 67 000 bpd in 2013 - 2014. In contrast, condensate production, associated with rising natural gas production, rose from 124 000 bpd in 2001 - 2002 to a peak of 153 000 bpd in 2009 - 2010 before declining to 125 000 bpd in 2013 - 2014.

These factors have pushed natural gas to the forefront in Australia's current energy development strategies. Natural gas reserves are more ample than oil reserves, reported at 129.9 trillion ft3, or 2% of the global total, according to BP. The year 2014 brought downward revisions in Australian reserves. OGJ listed Australia's proved natural gas reserves at 30.4 trillion ft3 at the beginning of 2015, a significant downward revision from the 43 trillion ft3 OGJ listed at the beginning of 2014. Geoscience Australia's reserve estimates are higher, and are more consistent with BP's figures. They include approximately 99 trillion ft3 of coal bed methane (CBM). CBM is similar to conventional natural gas reserves, being methane gas associated with coal seams. Production has been increasing recently, and CBM is now becoming a significant source of gas for LNG production. Australia also has a significant shale gas resource. The EIA released a study in 2012 placing Australia's technically recoverable shale gas reserves at a whopping 437 trillion ft3.

Natural gas exploration and production were given a major boost in 2000, when the Queensland State government passed regulations requiring that 13% of all power supplied to the state electricity grid be natural gas fired by 2005, with the share increasing to 15% in 2010 and 18% by 2020. The expanded emphasis on natural gas utilisation, however, contributed to a Western Australia supply crisis in 2008, when a corroded pipeline ruptured and caused an explosion at a gas processing plant on Varanus Island, off the north western coast of Western Australia. The plant, operated by Apache Energy, had been supplying roughly one third of the state's natural gas. The supply shortfall had serious impacts on businesses, industry, and the residential sector. Several investigations were launched, leading to a contingency plan that called for a combination of alternative gas supplies from the Northwest Shelf project, the recommissioning of a retired coal plant, a switch to diesel oil at some large generators, and conservation by consumers. The summer of 2008 was also the time of the diesel and oil price spike, and the Beijing Olympics, so diesel supplies were expensive. This incident caused intense focus on safety and supply security in the state. But it also stimulated investment in natural gas infrastructure, paving the way for new production.

Conventional natural gas production centres on the Cooper/Eromanga Basin in Central Australia, the Gippsland Basin in southeastern Victoria Province, the Carnarvon Basin offshore Northwestern Australia, and the Bonaparte Basin, which lies in the joint production area between Australia and East Timor.Australia in general has a strong tradition of environmental protection. It has been cautious about exploiting shale gas reserves, with the federal government, the Queensland government, and the New South Wales government placing tighter restrictions on their development, particularly in the areas of water use and disposal and land use. The New South Wales government had in fact placed a moratorium on hydro fracking in 2011, which it replaced the following year with a Strategic Regional Land Use Policy restricting CBM developments near residential areas and small businesses.

Read part two of this article here.


Written by Nancy Yamaguchi. This is an abridged article taken from the May 2015 issue of Hydrocarbon Engineering.

Read the article online at: https://www.hydrocarbonengineering.com/special-reports/27042015/australian-natural-gas-part-one-668/


 

Embed article link: (copy the HTML code below):