LNG

Several Australian exploration and production companies have signalled an imminent East Coast natural gas supply crunch while the approach of the Southern Hemisphere winter in June has already brought heavy rains and disrupted gas operations amid warnings that there was not enough new feed-gas developments for the three LNG export plants in Queensland.

March 26 (LNGJ) - The 11th edition of the Australian Domestic Gas Outlook (ADGO) conference was taking place in Sydney and heard concerns expressed about the poor regulatory performance and long delays imposed on natural gas and LNG projects. One of the first speeches at the two-day conference was given by ExxonMobil Australia's Commercial Director David Berman. Exxon operates the Gippsland Basin joint venture, the biggest single gas supplier to Australia’s southern states such as New South Wales, Victoria, Tasmania and South Australia.

   “Without investment, ExxonMobil Australia estimates that by 2030 domestic gas supply available to southern states will decrease by 44 percent,” Berman told the conference. “Chasing sizably lower domestic gas prices requires significantly shorter regulatory timelines because one third of the gas that will be required by consumers on the East Coast between 2025 and 2030 is not in production,” he warned.

Australian company Cooper Energy and Japanese trading house and LNG buyer, the Mitsui Group, said they planned to invest in buying and upgrading the idle Minerva Gas Plant in the state of Victoria to boost offshore natural gas supplies in southeast Australia.

Copper said both companies would make a joint commitment of A$55 million (US$384Mlb) to support increased and new domestic gas supply for the region.

The companies said A$37M would be spent on upgrading the plant, A$17.8M on purchasing it and on engineering and maintenance.

“This investment decision represents an important milestone in Cooper Energy’s continuing growth as a safe, competitive, efficient and reliable developer and marketer of new gas supplies for homes and businesses in southeast Australia,” said Cooper Energy Managing Director David Maxwell.

The infrastructure works at the Minerva Gas Plant will enable the supply of 16 petajoules of currently undeveloped gas.

Maxwell said this was an important commitment to infrastructure investment, local jobs and increased domestic gas supply.

“This is a ‘shovel-ready project’ which will see Cooper Energy and Mitsui Group upgrade the idle Minerva Gas Plant to be a processing hub for local production and discoveries in the offshore Otway Basin in Victoria,” explained Maxwell.

The Minerva Gas Plant is located near Port Campbell in Victoria and will be renamed the Athena Gas Plant in recognition of the expansion of its role in processing new supplies from the Otway gas fields.

“It means local jobs for local contractors which will help deliver reliable gas supplies into the East Coast market,” he stated.

“The investment follows the successful exploration program by Cooper Energy and Mitsui Group resulting in the Annie-1 gas discovery, in the Otway Basin, the first offshore discovery in southeast Australia over seven years,” added Maxwell.

The Cooper-Mitsui investment comes as two LNG import projects advance in southeast Australia to alleviate natural gas shortages.

Australian utility AGL Energy is progressing with its LNG import terminal project at Crib Point on Westernport Bay, south of the Victoria state capital Melbourne.

AGL said recently its environmental statement would be open for public comment until 26th of August 2020.

Subject to clearance, AGL hopes to make a final investment decision on the Crib Point project around the end of 2020.

A second LNG project aimed at ending gas shortages is being developed by Australian Industrial Energy (AIE) in the state of New South Wales at Port Kembla, south of Sydney.

That project is backed by the world’s largest LNG purchaser, JERA Co. Inc. of Japan, the Japanese trading house Marubeni Corp and Australian mining billionaire Andrew Forrest’s Squadron Energy.

The Minerva Gas plant project proposes to draw gas from four offshore wells (Casino-4, Casino-5, Henry-2, and Netherby-1) into the onshore plant via a pipeline tie-in and minor modifications.

“This will improve recovery enabled by lower plant inlet pressure and provide the ability to offer customers firm supply,” Cooper Energy explained.

“Following the completion and performance testing, first gas is expected to be delivered to the Minerva plant within the September quarter 202. This expectation incorporates allowances for uncertainty from Covid-19 as it is presently understood,” the company statement concluded.

Australia-Pacific LNG project shareholder Santos said it was set to advance with production expansion, including using the Barossa feed-gas field for Darwin LNG and investment in the construction of additional Trains for the Papua New Guinea export plant.

Australia is gearing up for a new round of oil and gas exploration through 2020 that could lead to new liquefied natural gas projects in the years ahead or to the extension of the life-spans of existing ventures.

Offshore exploration and appraisal drilling is finally beginning to recover, with eight wells to be drilled in 2019, up from only five in 2018.

The Australian consultants EnergyQuest have compiled a report covering the nation’s current and forward oil and gas exploration schedules.

Results for two of the eight wells drilled in 2019 have been announced so far, with important successes at both the Corvus-2 and Dorado-2 wells.

Santos, operator of the Gladstone LNG plant and a stakeholder in two other regional liquefaction and export facilities, confirmed a significant natural gas discovery after a successful appraisal of the Corvus field in the Carnarvon Basin offshore Western Australia.

The discovery is in the Corvus 2 well in petroleum permit WA-45-R and in which Santos has a 100 percent interest.

Santos also confirmed major oil and gas resources from well tests in the Bedout Basin, offshore Western Australia, citing analysis of its Dorado-2 appraisal well.

The Dorado-2 well is located in petroleum permit WA-437-P, about 160 kilometres north of Port Hedland and two kilometres away from the Dorado-1 discovery made in July 2018.

The town of Port Hedland is 230km north of the major Western Australian LNG export terminal at Karratha, operated by Woodside Petroleum.

Other wells to be drilled in 2019 include the Achernar-1 by Woodside on behalf of the North West Shelf LNG joint venture. It was spudded in early May in WA-28-P but no result was announced.

“If Achernar-1 is successful, Woodside has approval to drill up to two further exploration wells and three appraisal wells,” said EnergyQuest.

Santos and Carnarvon Petroleum are drilling Roc South-1 and Dorado-3, the first follow-up exploration well to the Dorado discovery and the second Dorado appraisal well.

ExxonMobil is also drilling the Sculpin-1 ultra-deepwater exploration well in VIC/P70 in the established Gippsland Basin in southeast Australia.

“The regulator, approved the environment plan on 17 June, just four months after it was submitted. Diamond Offshore’s ‘Ocean Monarch’ rig, which drilled the unsuccessful Baldfish-1 and Hairtail-1 wells in VIC/P70 last year, will return,” said the EnergyQuest report.

The report said that potentially big offshore wells are also being lined up for drilling in 2020.

Offshore Drilling is planned at Eagle and Kanga (SapuraOMV/Finder), Beehive (Total, Santos, Melbana), Stromlo (Equinor) and Ironbark (BP, Cue Energy, Beach and New Zealand Oil and Gas).

SapuraOMV was formed in January when Austria’s OMV paid US$540 million for a 50 percent stake in the exploration and production assets of Malaysia’s Sapura Energy.

Both companies are making their entry to Australia via the Finder Exploration joint venture.

The Eagle prospect in the Carnarvon Basin is immediately offshore from Onslow and the Wheatstone LNG plant I and has potential 1.2 Tcf of recoverable gas.

“It lies close to existing infrastructure with BHP’s Macedon pipeline and Chevron’s Wheatstone pipeline both running through the block,” said the report.

EnergyQuest noted that the next big offshore well is likely to be Beehive in the Bonaparte Basin, offshore northwest Australia where French major Total and Santos are working towards the exercise of an option over an 80 percent stake held by Melbana Energy.

Equinor’s Stromlo-1 will be the most anticipated offshore well of 2020, assuming Equinor receives approval for its environment plan and is not delayed by the government’s decision to have the plan reviewed by Australia’s chief scientist.

“If all goes well, Equinor will be drilling Stromlo-1 late in 2020 in the Great Australian Bight off the southern coast at about the same time BP spuds an exploration well at Ironbark in the Carnarvon Basin,” said the report.

“Ironbark is a 15 Tcf prospect, located about 40 km north of the North West Shelf fields and one of the world’s largest gas prospects,” it added.

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.

Santos Chief Executive Kevin Gallagher said the Australian energy and LNG production company was committed to boosting Cooper Basin production and working with domestic industry to deliver competitively priced natural gas as it signed another wholesale agreement.

Chevron Corp., currently producing LNG for the first time at its Wheatstone plant in Western Australia, has become the latest energy company to pull out of exploration activities in the offshore Great Australian Bight, a deepwater frontier basin in South Australia.

Origin Energy, a stakeholder in the Australia Pacific LNG venture, has agreed to spend A$250 million (US$201M) to take full control of the Otway gas project comprising two South Australian natural gas fields and other assets as it prepares to spin-off some of its upstream energy business.