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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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This World-Class Shale Frontier Just Opened Up

A region in Australia has recently lifted a moratorium on fracking. Local companies aim to begin this year exploration of what they believe are huge shale gas reserves, potentially capable of providing natural gas supply for decades and tackling a supply gap in Australia expected to emerge in the mid-2020s.

Australian natural gas producers say that the shale gas fracking will create jobs and reinvigorate the economy of the Northern Territory, where the basins they want to explore are located. The Australian government also supports the idea of extracting gas resources from the Northern Territory (NT), considering that conventional offshore gas production from the south-southeastern coast is declining.

However, potential commercial production of shale gas in the NT is at least half a decade away, because companies have yet to begin exploration of what they expect could be huge resources. Even if exploration proves commercially and technically extractable gas, the development of a shale gas industry is further complicated by the remoteness of the NT and lack of pipeline infrastructure to the biggest demand centers on Australia’s east and southern coasts. Moreover, environmental opposition to fracking in Australia is as strong as it is in other countries. Local campaign groups are challenging drilling permits and saying that fracking will destroy the water, the traditional medicine business, the air, and the traditional way of life of local communities.  

In February this year, Australia’s Origin Energy said in its first-half 2018/2019 financial report that it plans to drill this year two wells in the liquids-rich Kyalla and Velkerri shale plays in the Beetaloo Basin in the NT. Origin Energy aims to perform water bore drilling to obtain baseline data, and expects results from these activities over the financial year 2019-2020.

Origin has a 70-percent interest in exploration permits over 18,500 square kilometers (7,140 square miles) in the Beetaloo Basin, where estimates point to 2C contingent resources of 6.6 trillion cubic feet of gas.

This quantity could be enough to support a train for exports for 20 years, Mark Schubert, Executive General Manager Integrated Gas at Origin Energy, told Bloomberg. Related: Saudi Plans Leak: Riyadh May Raise Oil Production, But Not Exports

The Beetaloo basin has been compared to the Marcellus in the U.S., and the exploration will aim to assess if the Australian shale basin could have similar characteristics in terms of “deliverability”, Schubert told Bloomberg.

According to Australia’s government, the Beetaloo Sub-basin is “a world-class shale gas resource” and is home to more than three-quarters of the NT’s prospective shale gas resources.

“Recent estimates from companies exploring the area suggest that the shale gas resources could be even larger than first thought. While the scale of the gas resources in the Beetaloo Sub-basin is vast, exploration is only just getting underway. It remains uncertain what proportion of the resource will be technologically and economically viable to extract,” the Australian government said in February this year. 

Another Australian gas producer, Santos, also plans to drill for shale gas in 2019 in another basin in the NT, McArthur, after the Northern Territory Government’s decision that “any onshore shale gas industry in the NT can be appropriately managed.”

“With exploration and appraisal success, the NT’s McArthur Basin has the potential to do for the NT and Australia what the shale gas revolution has done for America, providing the competitive advantage to breathe life back into energy-intensive industries and generate wealth for the nation,” Santos CEO and Managing Director Kevin Gallagher said in April last year.

At Santos’ annual general meeting this week, Gallagher told shareholders, as carried by Bloomberg, that McArthur “is the largest and most promising shale gas opportunity in Australia.” Related: Sliding Oil Rig Count Props Up Oil Prices

Shale gas development has the potential to fill in the supply gap that declining conventional gas production could leave. The Australian Energy Market Operator (AEMO) forecasts in its 2019 Gas Statement of Opportunities “potential for supply gaps from 2024 onwards, unless additional southern reserves and resources, or alternative infrastructure, are developed.”

Fracking in Australia’s NT faces stiff opposition from environmental and indigenous groups. The NT Protect Country Alliance, a coalition of landholders, communities, and civil society groups, is campaigning against Origin Energy’s plans to frack in the NT.

“Origin tell their customers they are a ‘good energy’ company but there is nothing good about polluting our air and huge volumes of water to produce dirty fracked gas,” May August, a Traditional Owner for land under the Origin exploration permits, said in October last year.

Australia’s potentially huge shale gas resources could be a boon to the industry, but actual commercially profitable production is years away as it has to overcome economic, infrastructure, and environmental opposition challenges.

By Tsvetana Paraskova for Oilprice.com

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