Unconventional gas from central Australia's Cooper Basin could be the answer to a looming supply shortage in the eastern state of New South Wales, according to Beach Energy Managing Director Reg Nelson.
Beach has been among the first-movers exploring for shale and tight gas in the Cooper Basin, which is Australia's largest onshore conventional oil and gas province. The company recently finalized a deal worth as much as $349 million under which US major Chevron has farmed into its shale acreage in the region.
"There's still a lot of work to do but there's no doubt there is a huge amount of gas there if we can crack the code," Nelson said Monday in an interview on the sidelines of the Australian Petroleum Production and Exploration Association's annual conference in Brisbane.
Coalseam gas reserves being developed in New South Wales' northern neighbor Queensland will mainly feed three new export LNG projects currently under construction in Gladstone, Nelson said. He was also skeptical about the chances that New South Wales' own sources of CSG could be developed and piped to the capital Sydney in the right time frame.
Beach recently completed an eight-well drilling program targeting unconventional resources in its Cooper Basin acreage, including the region's first horizontal well, which is about to be fracture stimulated. A second horizontal well is still to be drilled.
So far, the company has booked a contingent resource of 1.5 Tcf at its unconventional acreage.
"If you're looking for gas for Sydney, where's it going to come from?" Nelson asked. "Clearly the potential sources are deeper waters offshore Victoria or Cooper Basin unconventional gas.
Nelson cited the basin's long history of production. "We're not doing anything new there, we're just doing it deeper," he said.
"The Cooper Basin is a far better place to be looking for gas for New South Wales, if we can unlock it. There's no reason why we can't replicate what's happened in the US."
Cooper Basin shales are thicker than those typically found in the US, Nelson added.
Subject to further studies, Beach is aiming to begin pilot production testing of its shale wells in the first half of 2014. The pilot program would run for six to 18 months.
Meanwhile, ExxonMobil and its partner BHP Billiton have been "doing their part" to develop offshore gas in the Gippsland Basin off Victoria to supply the eastern Australian market, the company's Middle East and Australia vice president, Mark Nolan, said on the sidelines of the APPEA conference. The joint venture late last year approved the construction of an A$1 billion ($964 million) gas conditioning plant at its Longford facility, which processes output from the Gippsland Basin.
Interstate supplies currently account for 95% of New South Wales' gas demand. The expiry over the 2014-2016 period of the state's existing supply contracts will coincide with a trebling in eastern Australia's demand for gas, to around 1,500 petajoules/year, as the Queensland LNG projects come on line.
