Shell Australia moves to help ease domestic gas supply constraints

PERTH (miningweekly.com) – The Australian Petroleum Production and Exploration Association (Appea) has welcomed news from major Shell Australia that its QGC joint venture (JV) has signed two new gas sales agreements with domestic customers, saying that it was a clear demonstration that the Queensland gas industry was doing its part to address domestic supply concerns.

Shell on Thursday announced that it would supply around 8 PJ of gas to the Pelican Point power plant, in South Australia, for five months over the peak winter period to help secure electricity contracts to major industrial users.

Under an 18-month agreement, it will also supply gas from Queensland’s Surat Basin gasfields to Orica’s Yarwun facility near Gladstone, which produces explosives and cyanide for the mining industry.

Shell chairperson Zoe Yujnovich said supplying the Australian domestic gas market was an important part of Shell’s business in Australia.

“These new sales agreements come after significant contracts were signed with power generators and retailers,” Yujnovich said.

“Together they bring QGC’s total domestic sales to about 11% of east coast demand for 2017. Shell’s business on the east coast has reacted to the gas market and reduced export volumes to supply additional gas to the domestic market during 2017.”

Yujnovich said Shell had long held the view that community acceptance of a liquefied natural gas export industry depended on a reliable supply of gas to Australian customers, including factories and homes.

“Make no mistake, the business I lead is pursuing further domestic supply agreements and has taken proactive steps to supply the east coast gas market,” she said.

Appea Queensland director Rhys Turner said QGC’s announcement that it would be supplying gas for power generation in South Australia and manufacturing in Queensland should be a wake-up call to other state governments to act to bring on additional supply.

“The gas industry is committed to ensuring that additional gas is provided into the market. QGC’s latest contract means that its domestic sales now account for 11% of east coast demand,” Turner said.

“These new contracts, coupled with the recent announcement by QGC that it will soon start drilling up to 161 additional wells as part of its Project Ruby, show the industry is delivering on its commitments.”

Turner said Queensland was playing its part in solving the supply problem, but south-eastern states were still dragging the chain.

“We have the absurd situation where the Victorian government, supported by the Victorian Opposition, has effectively banned all forms of gas extraction in their own state.

“The time has come for manufacturers and unions who have sought to apportion blame for the current supply issues to the Queensland gas industry, to now work with the gas industry to bring pressure to bear on state governments in the south-eastern states to remove barriers to exploration and extraction.

“The only way to meet gas demand for exports, domestic manufacturing and energy generation, in a sustainable manner, is to increase supply.”