THE Australian Petroleum Production and Exploration Association (APPEA) has raised concerns about a new gas marketing pilot programme announced by the Queensland Governmnt.
In announcing anew onshore acreage release, the Queensland Government said it would allocate a small volume of potential gas supplies for Australian use only from a pilot exploration project in the state’s Surat Basin.
Queensland’s Natural Resources and Mines Minister Dr Anthony Lynham said the exploration land release comes with with strict Australia-only sale conditions on gas produced.
The news drew a quick response from APPEA, which said that while it welcomed the latest release of acreage for natural gas exploration by the Queensland government it does not support the trial of 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 11,500km² 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.
“While the government is clear that this is only a trial, and it will only apply to 58km², 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.
“To its credit, the Queensland Government is developing an action plan to boost local supply. The industry supports this initiative – and urges other States to follow suite.
“More acreage for exploration and lower regulatory costs will help bring new supply to the market. More restrictive regulations will not.”
Minister Lynham said the move to trial the new restrictions was in response to gas shortages on the Australian eastern seaboard.
The government will release about 58 square kilometres of land for gas exploration, under the condition any gas produced must be used in Australia.
“Reliable supply for energy and feedstock is critical to business and industry, and the jobs and revenue they generate,” Dr 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 Palaszczuk Government is job-focussed and we are prepared to try innovative measures like this pilot to generate support private sector investment and job creation.
“This is a pilot to see what can be achieved and how the market reacts.”
The Department of Natural Resources and Mines will release the land in south-west Queensland to competitive tender by February.
The Surat holds some of Australia’s richest proven CSG resources and already supports 4000 wells producing more than 790 PJ of CSG (2015-1615) for export as LNG from Gladstone.
The government will use existing legislative powers to place a condition on the tenurepreventing the gas operator exporting the gas.
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.
Dr Lynham said the pilot would have no impact on existing gas producers or contracts in the state’s $$70 billion LNG industry.
“The major LNG exporters have extensive gas reserves already in place under production tenure, which has underwritten their investment decision.” he said.