LNG

Global natural gas prices remained flat even as Australian labor unions prepared to have all-out strikes from September 14 at the Gorgon and Wheatstone LNG export plants as mediation talks were still taking place in Perth in Western Australia.

The Australian Government plans to extend a natural gas price cap through mid-2025 while seeking to relax its attitude towards LNG exporters who have already agreed to domestic gas supply commitments.

The Australian Government has concluded an agreement with the East Coast LNG exporters in Queensland to ensure that uncontracted gas held by the three export plants in the state would first be offered to the domestic market before being offered to international customers.

Beach Energy, the Australian exploration and production company set to become the nation’s newest LNG exporter in 2023, has completed its Otway Basin drilling campaign offshore South Australia and Victoria to boost domestic supplies.

The Australian emerging natural gas producer Warrego Energy said the appraisal campaign near the West Erregulla gas discovery in the onshore Perth Basin was continuing with initial positive reports from drilling.

Warrego has already signed a deal with Alcoa of Australia, operator of one of the world's largest integrated bauxite mining operation, for volumes from the West Erregulla gas field discovery made in 2019.

Alcoa operates three alumina refineries, the Kwinana, Pinjarra and Wagerup plants in Western Australia, along with two bauxite mines.

Warrego has a 50-50 joint venture partner in Strike Energy.

The Warrego and Strike Energy West Erregulla concession forms part of a triangle between Mitsui’s & Co.’s Waitsia wells and Beach Energy’s Beharra Springs Deep.

The Waitsia well’s owners, Mitsui and Beach Energy, have already signed a liquefaction tolling agreement for LNG with partners at the Woodside-operated North West Shelf export plant.

The Warrego-Strike joint venture’s main discovery, the West Erregulla-2 well, had been drilled to a total depth of 5,100 metres, the deepest well drilled in onshore Australia, and flow tests achieved a world-class maximum flow rate of 69 million standard cubic feet of gas per day.

Strike Energy, as operator, provided a drilling update on May 17 on the current West Erregulla appraisal campaign.

“The WE-4 well flow testing continued with the well cleaning up and with favourable pressures measured,” said the Strike report provided to the Australian Securities Exchange by Warrego.

The report said the production testing was now in the clean-up phase and pressure conditions on initial flows at WE-4 are similar to the successful WE-2 well.

The result has been labelled “favourable” and the report said the high reservoir quality at WE-4 has been confirmed by core results.

“These results show permeability up to 430 metres in the depth of the well and porosity of up to 19.9 percent in the Kingia Sandstones,” the report explained.

Along with the WE-4 update, the joint venture said it had landed and cemented the surface casing string at WE-5, with drilling now at 2,785 metres measured depth (MD).

Warrego previously noted that any increase in West Erregulla’s certified resources would be welcomed by the market, and further success would add considerably to the current gross contingent resources. 

Australia has released an interim report as part of its Gas Inquiry and says that concern about prices in the East Coast market could be alleviated if there was more investment by LNG producers in resource development and key infrastructure.