Oil and gas experts Mr John Davidson and Dr Andrew Wadsley who, between them have more than 90 years’ experience in the oil and gas industry, have carried out an independent analysis of the gas supply shortfall to Eastern Australia. Their analysis is based on the actual production performance of each field and a reserves analysis derived from a detailed understanding of the geology and reservoir characteristics of the main petroleum basins.

“The AMEO estimate of a 54 PJ gas shortfall in 2018 and 48 PJ shortfall in 2019 is confirmed by our analysis. However, the shortfall is not caused by the development of coal-seam gas (CSG) for export from the Gladstone LNG plants.” said Dr Wadsley. “In the short term, CSG can provide sufficient additional gas to supply the domestic gas market over the period 2018 to 2019 and should be seen as a solution to the problem, rather than the cause.”

The independent analysis provides a month by month detailed picture of the production shortfall, shown in the Figure. From 2018 onwards there is increasing shortfall in gas supply until, in 2028, Gippsland Basin reserves are depleted at which time there is no proven, non-CSG, gas resource in Eastern Australia available to supply the domestic market.

Mr Davidson pointed out that the cause of the shortfall is principally due to the failure to find commercial unconventional (tight+shale) gas in the Cooper Basin. “As late as 2016 the US Geological Survey (USGS) was predicting proven+probable (2P) gas resources of 27.9 Tcf in the Cooper Basin, of which 14.5 Tcf was in the Nappamerri Trough. This estimate completely ignored the significant difference in rock stress regimes between the Cooper Basin and low-stress, highly productive areas in the United States, and the failure of the recent $180m drilling programme by Beach and Chevron to produce commercial gas from the Nappamerri tight gas plays.” Mr Davidson went on to say: “Our analysis of the prospectivity of Gippsland, Bass, Otway and Cooper basins shows there is little likelihood of finding substantial gas reserves to supply the production shortfall to end-2028. Beyond 2028, just 10 years from now, the domestic, Eastern Australia gas supply falls off a cliff.”

The in-depth analysis concluded that removing the ban on onshore gas exploration in Victoria and fraccing bans in all states will do little to solve the supply problem. All solutions to the supply shortfall involve importing gas from outside the traditional gas basins. The analysis looks at short-term (2018-2019), medium term (2020-2027) and long-term (beyond 2028) gas supply options:

For 2018 to 2019, South-Eastern Australia requires an extra 50 to 110 PJ of gas per year. 50 PJ/yr is equivalent to 140 TJ/d (terrajoules/day), with peak shortfalls of 190 TJ/d during the winter months. 50 PJ is just 4% of the LNG export capacity, and can be produced by accelerating the drilling of CSG wells and diverting this gas southwards. In April 2017, Shell announced plans to drill an extra 161 CSG wells by end-2018 to underpin gas supply to the domestic gas market. From 2020 to 2027, AGL’s proposed LNG imports to Victoria will ease the supply situation although the predicted shortfall of 300 PJ in 2027 would require importation of a significant number of LNG cargoes. An alternative is to swap LNG cargoes from Gladstone with LNG exports from the West Coast and reroute the resulting freed-up CSG gas southwards. From 2028 onwards, supply is principally from the West Coast by pipeline, such as the Northern Gas Pipeline Project and the recent, federally-proposed West Coast to Moomba pipeline, possibly via Kalgoolie. Winter swing production can be supplied by LNG imports which are counter cyclic to northern hemisphere LNG demand.

In the short to medium term, there is no viable alternative to importing LNG into SE Australia. From 2020, the supply shortfall exceeds 200 TJ/d, which is significantly greater than the capacity of any potential new field developments or expansions. Existing Gippsland wells can supply the gas, but this could lead to curtailment of already-contracted gas in the mid 2020’s. Failure to meet the shortfall will inevitably lead to very chilly winters in Victoria and South Australia, and possible brownouts in all states including Tasmania as GPG (gas-powered generation) is progressively shut in.

The analysis by Mr Davidson and Dr Wadsley is based on proven production engineering principles and understanding the geology of each producing basin in Eastern Australia. A course explaining these issues is currently being run regularly – visit the website epguru.com for more details.

For more information, please contact Mr Davidson on 0408 126111 and Dr Wadsley on 0418 320492.