A leading Australian oil and gas industry analyst has raised major concerns about the amount of gas that is available to support the multi-billion dollar Queensland CSG-LNG projects.
Described as a “highly forensic review of Australia’s east coast gas sector”, a new report from EnergyQuest has found that estimates of commercial gas reserves to service Queensland’s new Gladstone-based LNG industry and local domestic gas consumption, carry substantial risks that are not widely appreciated.
The review’s author, EnergyQuest CEO, Dr Graeme Bethune, says this puts at risk the longer-term security of east coast gas with current investment in new supply for that market being “nowhere near sufficient”.
The findings include a warning that in the absence of any Federal Government action to solve the gas supply challenges, affected states may take matters into their own hands, leading to the “unravelling” of the national gas market.
The revised reserves outlook is contained in the just released March quarterly review by respected independent energy consultancy, EnergyQuest. The report coincides with Australia’s LNG exports hitting a monthly record of $2 billion in January this year off a 48.7% surge over 2016 to total LNG exports of 45.2 million tonnes compared to 2015.
Dr said EnergyQuest had previously flagged a significant east coast supply gap of around 172 petajoules (PJ) of gas by 2020 building to 205 PJ by 2025, exacerbated by easing output in three southern basins – Gippsland, Otway and Bass.
“As Queensland’s coal seam gas (CSG) output will now dominate future total production in the east coast gas market, we undertook a detailed bottom-up analysis of this market’s gas production outlook,” Dr Bethune said.
“In particular, we compared stated Proved and Probable reserves (known as 2P, gas volumes already classed to be commercial) and matched them against our own assessment of drilling statistics for 8,000 gas wells, stated reserves for 50 gas exploration permits and 250 production licences (PL) and 10 years of production data from 250 PLs along the east coast.
“Our conclusion is that CSG (which comprises 91% of stated east coast reserves) has been oversold, with potential reserves risk.
“The new Gladstone CSG to LNG industry is fed by booked 2P reserves but substantial reserves are booked in areas that have not yet demonstrated any commercial production.”
Dr Bethune said this scenario was compounded by the fact that the east coast’s conventional gas fields are now mature and face increasing output challenges.
“While there is some investment underway in new east coast gas supply, it is nowhere near sufficient and this reinforces the growing concern about gas supply security on the east coast,” he said.
“It is not an issue of short-term security. With ~3,500 terajoules per day of gas production in Queensland from numerous plants, the east coast is better protected against any short-term supply emergency. The concern is more for longer-term security.”
Dr Graeme Bethune says there are major concerns with the future supply of east coast gas.