Onshore gas developers call for incentives
Onshore gas developers in the Perth Basin needed incentives to spend the money required to bring gas to market, the Energy Club’s April dinner was told.
Strike Energy Managing Director and Chief Executive Officer Stuart Nicholls, Mineral Resources Chief Executive Energy Darren Hardy, and Australian Gas Infrastructure Group Executive General Manager Commercial Jon Cleary discussed a range of issues, including the ability to export onshore gas, the future of Carbon Capture and Storage, and the restrictions of “green tape” during their panel session.
In an introduction prefacing the discussion, Mr Nicholls said if WA “doesn’t stimulate our industry to take more risks to drill more exploration holes, to shoot more seismic, we are going to come into a situation where we don't have enough gas and we are starting to manage demand rather than supply”.
Mr Hardy said Mineral Resources, which he said was the largest acreage holder in the onshore Perth and Carnarvon Basins, was committed to spending more than $100 million on exploration in the next five years.
“We're very confident we have found enough gas to not only power our own operations, but to contribute significantly to the local domestic market,” Mr Hardy said.
He said the scale of the development would depend on the State Government making changes to the existing gas export policy.
The industry is waiting on a decision from the Government on possible changes to its WA Domestic Gas Policy
“We've been saying publicly for some time now that the current restrictions stifle investment and we need as a State to bring on gas sooner and at scale,” Mr Hardy said.
“To justify an investment of close to $1 billion, we require partial export before 2030. We're proposing reserving 15 per cent for the domestic market for the first five years. Then from 2030 any gas we produce will be available for domestic use.
“We've also proposed a mechanism that would allow the State Government to call in that additional gas if there's a shortfall as predicted before 2030.
“We believe these changes will ensure there's more gas in the domestic market when it is needed most.”
Mr Hardy said “confidence was building…that the State Government realises to bring more gas into the market they’ve got to be able to support the investment”.
Mr Nicholls said the risk profile of oil and gas was regularly forgotten by the people that buy the product and the “spectators of our market”.
“It's demonstrated by some of Strike’s recent subsurface results. We were incredibly confident of drilling up dip appraisal wells from a gas discovery and these ended up not going the way that we wanted to,” he said.
“That cost us $40 million. We’re a small business... in order to be able to continue to do these things there has to be the financial incentive.”
But he said the domestic gas users of Western Australia were staunchly in opposition to mining houses MinRes and Strike accessing the LNG markets.
“It just seems to be an argument about price… (they) all just want gas at a cheaper price. That’s fine, that's the commercial agenda. But at the same time, why is it the job of Strike’s shareholders to transfer their value to that of their businesses?”
Mr Nicholls said the Government needs to incentivise upstream producers “whose jobs are only getting harder because of the cost of capital, the cost of insurances, the prices of our oilfield services continue to go up”.
“It's not just the price. There is an enormous amount of green tape now that needs to be looked at and that's being driven out of Canberra.”
Mr Cleary said: “There needs to be incentive to bring more gas into the market. And if that means we have to either have connection to LNG netback pricing or physical volumes going out of country to bring more gas into the domestic market, then that's what we need to do.”
On Carbon Capture and Storage, Mr Cleary said it could work in WA.
“The trick with CCS is you don't want to transport CO2 very far. You’ve got to keep your costs as low as possible, so CCS needs to be as close to your emitters as possible.
"If we can decarbonise our gas industry in WA, then I think we have a very long life ahead of us in terms of a gas-based economy.”