Queensland tests gas reservation policy with release of new acreage

PERTH (miningweekly.com) – The Queensland government will release 58 km² of land for gas exploration, but with the condition that any gas produced has to be used in Australia.

Natural Resources and Mines Minister Dr Anthony Lynham said on Wednesday that the pilot exploration project in the state’s coal seam gas- (CSG-) rich Surat basin was in response to expected gas shortages.

“Reliable supply for energy and feedstock is critical to business and industry, and the jobs and revenue they generate,” Lynham said.

“Gas is a significant transitional energy source as we head to a renewable energy future.

“Secure energy supplies is growing as a critical factor when businesses make decisions about when and where they invest, expand and create jobs.” 

The government will use existing legislative powers to place a condition on the tenure preventing the gas operator exporting the gas.

Lynham said the pilot would have no impact on existing gas producers or contracts in the state’s A$70-billion liquefied natural gas (LNG) industry.

“The major LNG exporters have extensive gas reserves already in place under production tenure, which has underwritten their investment decision,” he said.

The Department of Natural Resources and Mines will release the land in south-west Queensland on a competitive tender basis by February.

The successful bidder will be required to complete environmental and other requirements before any tenure can be granted. This includes negotiating land access agreements with landowners and native title parties.

The Australian Petroleum Production and Exploration Association (Appea) has welcomed the new exploration acreage, but said that it did not support the trial restrictions on gas marketing.

“Producing more gas from Queensland fields is essential for both the LNG export industry and local customers.  The best – indeed the only – way to put downward pressure on local prices is to expand supply,” said Appea CEO Dr Malcolm Roberts.

“Over the last two years, the state government has released about 11 500 km² for exploration. Unlike other states, which are playing politics with Australia’s gas supply, the Queensland government understands the urgent need to develop new gas reserves.

“However, Appea is disappointed that the government has, for the first time, attached ‘Australian market conditions’ to the release of new acreage.

Malcolm said that while the government is clear that this was only a trial, and it would only apply to 58 km², imposing restrictions is unnecessary and can only discourage development.

“Australian market conditions are unnecessary. Queensland’s LNG projects are the leading suppliers to the local market. Supply to domestic customers from the projects is upwards of two-thirds of Queensland’s demand. Customers do not need regulation to obtain gas.

“Experts such as the Productivity Commission and the Australian Competition and Consumer Commission have warned that governments intervening in the market risk killing the incentive to develop new reserves.

“Now is not the time to create regulatory uncertainty. Eastern Australia is facing a supply shortfall in 2019.  Exploration has crashed to its lowest level since 1981. We need to see state governments striving to expand gas supply by releasing more acreage and cutting regulatory costs.”

The Surat holds some of Australia’s richest proven CSG resources and already supports 4 000 wells producing more than 790 PJ of CSG (2015/16) for export, in the form of LNG, from Gladstone.

The land release comes on top of 11 000 km² recently awarded for gas exploration in the Cooper and Eromanga basins, and 450 km² in the Surat and Bowen basins.