Analysis, Coal seam gas, Exploration, Legislation, Otway Basin, Policy, Projects, Shale, Surat Basin, Victoria

Unconventional attitudes: a state-by-state analysis

Australia has significant unconventional oil and gas potential, with prospective resources identified in a large number of basins around the country.

However, policies regarding and attitudes towards unconventional gas development vary greatly across Australia. While some states actively seek to develop their unconventional gas industry others have moratoriums on unconventional exploration and development activities.

In this article, we will explore the status of unconventional oil and gas development in each state, examining the existing policies and prevailing attitudes of state governments towards the industry and how these relate to the attractiveness of each state for unconventional oil and gas investment.

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South Australia = A

South Australia has very large potential unconventional gas resources, including those within the Cooper Basin considered one of the most prospective areas for shale gas and oil development within Australia with a number of producing wells already drilled. A variety of significant projects are underway to develop the state’s unconventional resources, including the South Australian Cooper Basin Joint Venture exploration program. Exploration activities are also underway in the Arckaringa and Otway basins.

Unconventional oil and gas exploration and development activities within the state are regulated by South Australia’s Petroleum and Geothermal Energy Act 2000 (P&GE Act) and the accompanying Petroleum and Geothermal Energy Regulations 2000.

The State Government is generally very supportive of unconventional oil and gas development, and South Australia was the first Australian state to launch a comprehensive plan for the development of its unconventional gas resources in their Roadmap for Unconventional Gas Projects in South Australia.

Yearly roundtables are held to discuss ways to implement the recommendations from the Roadmap for Unconventional Gas Projects in South Australia and report on its progress. These include representatives from local and multinational companies, peak representative bodies for industry and environment, agencies from Australian States and Territories, Federal Governments and research institutions. Research activities that have been funded to better understand the scale of SA’s unconventional resources and how best to develop them include the creation of the Cooper Basin atlas: understanding Australia’s premier onshore hydrocarbon province, GeoFrac and an Australian Research Council (ARC) project to develop an integrated approach to unconventional gas exploration and development. A number of working groups have also been established to address issues facing the industry.

The Fraser Institute’s 2015 Global Petroleum Survey ranked South Australia as the twelfth most attractive jurisdiction for oil and gas development in the world, the highest rank of all Australian states.

The CSG to LNG industry in Queensland is well-established and now delivering gas to international trading partners.

The CSG to LNG industry in Queensland is well-established and now delivering gas to international trading partners.

Queensland = A

Queensland is currently the largest unconventional gas producer in Australia, with a well-established coal seam gas industry producing gas from the Surat and Bowen basins.

Commercial coal seam gas production began in the Bowen Basin in 1996. In 2013/2014, 0.0996Tcf of CSG was produced in the basin. CSG production from the Queensland parts of the Surat Basin has increased dramatically over the last decade, from none in 2003/2004 up to 0.157Tcf in 2013/2014, making it the highest producing CSG basin in Australia.

CSG fields in the Surat Basin supply increasing quantities of gas to the domestic market and will also supply gas to three of Australia’s pioneering CSG to LNG projects, the QCLNG project, the GLNG project and the APLNG project.

Shale and tight oil and gas assessment activities are also underway in these basins, as well as within the Queensland parts of the Cooper Basin. Other Queensland basins with unconventional potential include the Clarence-Moreton Basin (CSG), the Maryborough Basin (tight gas, shale gas, CSG), the Galilee Basin (tight gas, shale gas, CSG) and others.

The Queensland Government is highly supportive of unconventional oil and gas development, with initiatives in place such as the $30million Future Resources Program, which aims to maximise exploration success by supporting Queensland’s resource and exploration industries; the $18million Greenfields 2020 program; the ResourcesQ Cooper Basin Industry Development Strategy; and the Queensland Gas Supply and Demand Action Plan, expected to be finalised in the first quarter of 2016.

Some of the largest unconventional gas projects underway in the state include the Surat Gas project, Western Surat Gas project, Bowen Gas project, Moranbah Gas project and Nappamerri Trough Natural Gas project.

Western Australia = B+

Potential tight and shale oil and gas resources are thought to exist throughout Western Australia, including within the Perth, Canning and Bonaparte basins. In 2013, the EIA suggested that the Goldwyer Formation in the Canning Basin has the largest shale gas potential in Australia, estimated at around 235Tcf of recoverable gas. A number of companies are currently undertaking exploration and well testing activities in order to determine whether these resources can be developed economically.

The Western Australian Government has a number of programs underway to support development of hydrocarbon resources in the state. In December 2015, the government awarded a $5million contract as part of a $7.3million expansion of the Perth Core Library to assist exploration for mineral and petroleum resources.

In November 2015, the final report of a two-year parliamentary inquiry into fraccing suggested that Western Australia’s regulators were well prepared to manage the developing shale and tight gas industry and associated hydraulic fracturing processes.

In July 2015, the Petroleum and Geothermal Energy Resources (Resource Management and Administration) Regulations 2015 came into effect. These regulations provide a risk-based management scheme for the exploration for, and production of, petroleum energy resources. A range of resource management and administration matters are covered by the regulations, including well management plans for the approval of all drilling activities (including shale and tight gas), notification and reporting of discovery of petroleum; field management plans and approvals of petroleum recovery.

Acreage releases are generally made twice a year for the areas within Western Australia’s jurisdiction. Currently, the government is accepting applications for PELs within the Canning Basin and Northern Carnarvon Basin.

However, Western Australia currently has a domestic gas reservation policy in place which requires new gas developments to supply the equivalent of 15 per cent of their gas exports to the Western Australian domestic gas market.

In the Northern Territory, the government has put measures in place to attract explorers to the region.

In the Northern Territory, the government has put measures in place to attract explorers to the region.

Northern Territory = B

The Northern Territory’s unconventional oil and gas industry is still at an early stage, although potential resources have been identified in a large number of basins around the state, including the Georgina Basin, McArthur Basin/Beetaloo Sub-basin, Amadeus Basin and Eromanga Basin.

The Northern Territory Coalition Government has selected Jemena to construct and operate the North East Gas Interconnector (NEGI) Pipeline, in order to connect NT gas to the eastern gas markets. The pipeline is intended to encourage new oil and gas developments in the state by ensuring that they have an existing buyer for the produced gas. In 2014, the state government commissioned a review into the practice of hydraulic fracturing, which found that the industry could be developed safely and effectively with the right regulation and would bring significant economic benefits to the state.

In November 2015, the government released its Oil and Gas Industry Development Strategy outlining its plans to foster development of the state’s hydrocarbon resources. The four main priorities focused on in the report include increasing awareness of and access to the Northern Territory’s oil and gas resources; the capital, development pathways, and market access needed to bring new resources into production; balanced legislation and regulation; and a competitive, highly skilled, local gas supply and service sector.

The government has also recently granted a number of new PEL applications throughout the state. However, two of these, one for Palatine Energy in relation to the Watarrka National Park, and one to NT Gas, in relation to the Coomalie Council Region, were rejected due to not meeting the requirements of the new process for land-access agreements introduced in late November 2015. The effect these new requirements might have on the attractiveness of the state for unconventional oil and gas development remains to be seen.

Tasmania = D

Tasmania’s unconventional gas industry is still in its infancy with very little exploration activity yet undertaken, although the possibility of shale and/or tight oil and gas exists in some areas.

Currently, there is a moratorium on fraccing until March 2020, although other exploration activities for unconventional gas resources are allowed.

This fraccing moratorium was introduced in March 2014 after the election of the Liberal Government, and was originally intended to last for 12 months as the government undertook a review into the practice. After the review concluded, the government announced that it would extend the moratorium for another five years due to community concerns. The current government’s policy statement states: “fraccing in Tasmania is a possibility, not a probability”. Another review into hydraulic fracturing in Tasmania will be undertaken before the moratorium expires.

While exploration activities for unconventional gas resources other than fraccing are permitted within Tasmania, the moratorium on fraccing and the largely unknown status of the state’s unconventional resources and whether they can be extracted economically makes the future of its unconventional oil and gas industry uncertain.

New South Wales = D-

New South Wales is thought to contain significant potential unconventional gas resources in the Surat, Sydney, Gunnedah, Gloucester and Clarence-Moreton basins.

Currently, NSW imports 95 per cent of its gas from other states, with the remaining 5 per cent produced by AGL’s Camden Gas Project, which produces coal seam gas in the Macarthur region. Two large unconventional gas projects are under development to help meet the state’s energy needs: AGL’s Gloucester Gas Project and Santos’s Narrabri Gas Project.

On 26 March 2014, the NSW Coalition Government announced a moratorium on the approval of petroleum licence applications, which was later extended until 31 December 2015 as a series of reviews were undertaken as part of the NSW Gas Plan. The NSW Gas Plan is currently in the process of reviewing regulations in regards to the development of coal seam gas and other unconventional gas resources across the state, tightening regulations and placing new restrictions on exploration and development activities. A PEL buy back scheme was also implemented with a number of licences bought and cancelled by the government, reducing the footprint of petroleum titles from 60 per cent to around 8.5 per cent of NSW.

Certain areas of urban and agricultural land are now off-limits to unconventional gas activities, as are national parks, areas close to water catchments and where other land use conflicts may occur.

According to the industry, the restrictions imposed by the NSW Gas Plan and continuing policy uncertainty are strong deterrents to unconventional oil and gas investment. As a result, the state ranked last out of all Australian jurisdictions in the Fraser Institute’s 2015 Global Petroleum Survey, which evaluates the attractiveness to oil and gas investment of jurisdictions across the globe based on barriers such as fiscal terms, environmental regulations, regulation uncertainty and other factors.

Victoria = F

In Victoria, state governments have bowed to activist pressure and the oil and gas industry is at a complete standstill.

In Victoria, state governments have bowed to activist pressure and the oil and gas industry is at a complete standstill.

While Victoria has a number of potential unconventional resources, such as those in parts of the Gippsland and Otway basins, the unconventional gas industry in the state remains underdeveloped.

Currently, there is a moratorium on unconventional oil and gas activities within Victoria, in addition to a hold on various approvals for new onshore conventional oil and gas development. Under the terms of the moratorium no new exploration licences are to be granted for any type of onshore gas (including tight, shale, coal seam and conventional gas) and no applications will be approved for hydraulic fracturing or exploratory drilling. The use of BTEX (benzene, toluene, ethylbenzene, xylene) chemicals is also banned.

This moratorium has been in place since 2012 when it was introduced by the Coalition Government of the time. Originally it covered only activities related to coal seam gas, however it was extended to cover all onshore gas exploration in 2014.

When the Andrews Labor Government was elected in 2015, it launched an inquiry into onshore gas in Victoria to investigate the possible impacts of onshore gas development activities. The inquiry’s report was tabled in December 2015 and the moratorium will continue at least until the government formulates its gas policy, which is expected to occur in the first half of 2016. However, the Victorian Liberal Opposition recently announced that it would extend the moratorium until at least 2020 if elected in the 2018 state election.

The future of Victoria’s oil and gas industry is uncertain, especially in relation to unconventionals, preventing the state from being attractive to investment. Until the moratorium is lifted and regulatory conditions are less volatile, it is unlikely that a productive unconventional oil and gas industry will develop in Victoria.

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