Elections pave way for Oz shale [NGW Magazine]
The Northern Territory elections have returned the Labor Party to power and, in doing so, have secured a promising future for the local upstream sector.
In the run-up to the election doubts had begun to surface as to whether Labor would be able to deliver on its promised gas-led economic recovery, following the Territory Alliance Party’s (TAP) pledge in June to ban hydraulic fracturing (see sidebar).
Although the NT is a major producer of conventional gas – both onshore and offshore – the territory’s resource future is widely believed to be tied to its significant shale gas potential in the Beetaloo Basin, which is estimated to hold 500 trillion ft³.
But while TAP was founded by former Country Liberals Party (CLP) leader Terry Mills as a “grassroots alternative” to the two-party system in 2019, the fact that it lost two of its three seats suggests voters have moved on from the fracking-related concerns that overshadowed 2016’s election.
Labor saw its share of the parliament’s 25 seats fall from 15 to 14 following the elections, while the CLP quadrupled its seat count to eight.
The CLP, however, has been a major proponent of shale gas development and has encouraged NT Chief Minister Michael Gunner’s administration to do more to support the industry following the end of two-year fracking ban in 2018. With the territory’s new nine-person cabinet sworn in on September 8, it appears Labor is ready to do just that. Gunner took on the additional portfolio of minister for major projects and Territory economic reconstruction while deputy chief minister Nicole Manison will double up as the mining and industry minister.
Gunner believes the NT could become the nation’s economic “comeback capital” in the wake of the Covid-19 pandemic. His government expects to achieve this through expanding the Darwin LNG export terminal, growing the NT’s service and supply industry and establishing gas-based processing and manufacturing.
The chief minister established the Territory Economic Reconstruction Commission in May to help guide his government toward its goal of adding 35,000 jobs within 10 years while also quadrupling the NT’s economy to A$40 (US$28.9)bn within the same time frame.
In the commission’s first report, which was published in July, it noted that the “Beetaloo sub-basin shows significant potential to provide gas and liquids for energy use and to underpin a petrochemical manufacturing industry in the territory – driving significant economic benefit”. The commission is set to deliver a final report in November and, given recent comments from Gunner, it is unlikely to deviate to much from its original conclusions.
“We have a clear plan to create jobs, to get out ahead of this [economic downturn], to be the comeback capital for the country, about how we can invest in manufacturing, how we turn Darwin into an answer to Australia’s problems right now,” national broadcaster the ABC quoted the chief minister as saying on September 6.
Labor’s return to power has been welcomed by the Australian upstream, with the director of the Australian Petroleum Production and Exploration Association’s (Appea) NT branch, Keld Knudsen, congratulating the ministers on their appointment.
Couldn’t be happier
Lobby group Appea’s default setting is resigned disappointment at state or federal government decisions to limit the opportunities for gas production, so NT’s decision is a welcome change. Knudsen said: “The Northern Territory is home to a world-class natural gas industry that already makes a substantial contribution to the national and territory economy and this will grow and continue to for decades to come.”
He added: “We have a tremendous opportunity to continue to turn the territory’s existing and prospective natural resources into long-term prosperity, creating more jobs, driving investment and increasing economic growth.”
Beyond Labor’s victory, however, the upstream must be relieved not only that the CLP is once more a viable opposition party but that TAP faired so poorly in the election.
The TAP had managed briefly to claim opposition status in the NT parliament after independent Robyn Lambley joined the party thereby bringing its seat count to three. A secret parliamentary ballot a week later, however, returned opposition status to the CLP.
However, the most recent election not only gave the CLP eight seats but also decimated TAP’s parliamentary position. On the national stage, CLP Senator Sam McMahon described the results as a “resounding rejection” of TAP’s “anti-gas policies”.
Labor and the CLP now hold 22 seats between them and are firmly on the same page when it comes to gas’ role in the territory’s economic future. Indeed, McMahon called on the Australian Senate on September 2 to acknowledge the importance of the territory’s onshore gas industry and in particular the Beetaloo Basin’s development.
She moved a general business notice calling on the Gunner government to “urgently work with the federal government and industry to ensure that the potential benefits of developing the Beetaloo Basin are fully realised”.
Appea’s Knudsen has said that if exploration in the Beetaloo is successful then it could take the shale gas industry three to four years to start producing.
“We’re looking to invest up to A$10bn in a production scenario, over the 40-to-50-year life of the project, and everything that we’ve seen has indicated that the long-term demand for gas is still there, particularly in Asia,” the ABC quoted Knudsen as saying.
Projects and pipelines
Industry observers are watching Origin Energy’s development of EP117 in the Beetaloo closely, with fracking of the Kyalla 117 well slated to begin in the second half of this year.
Junior partner Falcon Oil and Gas said in August that initial results from the production test were expected by the end of the year, with final results anticipated in the first quarter of next year. Kyalla 117 was drilled in February, but Origin suspended its Beetaloo operations in March in response to the Covid-19 pandemic. Origin operates EP117, EP76 and EP98 with a 70% interest, while Falcon owns the remaining 30%.
And late last month Sydney-listed Empire Energy announced it had raised A$10mn through a share placement to further its own Beetaloo exploration programme. Empire said it was fully funded to drill Carpentaria-1 in September, and planned fracture stimulation and flow testing for Q2 2021. The company has started work in preparation for drilling the Carpentaria-1 well in EP187 including upgrading the access track, construction of the well pad and water bore drilling.
While the private sector is forging ahead with proving up the NT’s shale potential, the government is taking steps to help realise its gas-fed manufacturing ambitions, reportedly awarding a pre-feasibility study for a gas pipeline to transport gas from Beetaloo to Darwin. CNC Project Management won a A$327,000 contract for the study, the Katherine Times reported on September 8. The project will consider route options within a 100-metre wide corridor that will start in Tennant Creek and run through Katherine and Pine Creek before terminating in Darwin.
“This [study] is aimed to provide clarity to the Gas Taskforce and government for future decisions regarding acquisition of a corridor to transport gas from on shore reserves to existing and planned gas industry infrastructure,” the paper quoted tender documents as saying.
CNC will also be expected to “conduct and record initial landowner discussions with regard to the position of the corridor within their property”.
The award comes after Central Petroleum, Australian Gas Infrastructure Group and Macquarie Mereenie unveiled plans in August to seek government funding for a pipeline to connect the Amadeus gas field to the Moomba pipeline in South Australia.
The existing Moomba pipeline feeds the Santos-run Moomba gas hub, which is an important nexus of gas trading in the country’s southeast that connects Queensland, New South Wales and Victoria.
The Amadeus-Moomba Gas Pipeline (AMGP), which has a projected price tag of A$1bn and would span 950 km, is less than half the current 2,200 km route that Amadeus gas must travel to reach Moomba. Central said the AMGP, which will have a free-flow capacity of 45 PJ/yr and will be expandable with compression, will transport gas from discovered offshore gas fields as well as the territory’s various unconventional exploration programmes.
With elections out of the way and both the federal and NT governments singing from the same hymn sheet when it comes to gas’s economic importance, there is every reason for the upstream to be upbeat.
TAP's proposal to halt hydraulic fracturing this summer caught the upstream on the hop, as it had earlier approved it. TAP said existing exploration licences will not be renewed, and no more production permits will be issued. Existing production may only continue where sufficient community and environmental safeguards are implemented.
Apart from the alleged environmental risk posed by hydraulic fracturing, TAP justified its proposal on a number of grounds that might be for the investor to take after assessing the risks, rather than for the government.
These include the gas oversupply in world markets. It said: "The glut is not expected to clear until after 2030. This is not simply a short-term blip caused by a Covid related down-turn but was a well-established trend even before the pandemic forced widespread industrial closures. It has been well known since 2017 that production was far outstripping demand, with both investors and production companies taken to task for their addiction to growth and to ‘stop counting barrels and start making money’.
Another factor was sovereign risk, scaring off investors upstream with Canberra's plan to limit exports: "The Commonwealth Australian Domestic Gas Security Mechanism has also spooked the market with many established companies exiting Australian projects citing the inability to secure long term supply contracts," it said.
Another factor is the shrinking pool of money to finance these projects: natural gas is also becoming too risky for major investors and risk-averse major investment banks are divesting shares. And another reason it gave is the European Union's plan to impose a carbon tax on imports, which would apply to LNG as well.
Appea responded: “The backflip is staggering given [party leader] Mr Mills said in January: ‘If onshore gas is a viable industry in every way, then we should welcome it as a part of our economy. To do otherwise would send a message of uncertainty and governmental incompetence to all businesses right at the time when the NT is most in need of additional business investment."