Gas industry looking after business, onshore and offshore

December 7th, 2017

Two major landmarks for Australia’s natural gas industry this week further underline the way the industry is firing economic growth and meeting the demands of both overseas and domestic customers.

Of great benefit to the entire nation is the way the liquefied natural gas (LNG) industry is driving ahead, delivering production and export record after record.

And of related importance is this week’s announcement of a 27-year supply deal from the Arrow-owned resources in south-west Queensland – a commitment which gives a great confidence boost to the long-term interests of both the coal-seal gas (CSG) and LNG export industries.

The deal, signed between Arrow owners Shell and PetroChina, and Queensland Curtis LNG (QCLNG) a joint venture between Shell and Chinese and Japanese partners, helps ensure there is enough gas to go around for both offshore and domestic demand.

This domestic element is an important aspect of the deal, because Australia’s East Coast gas market is struggling with tight supply.

It further illustrates the industry’s willingness to embrace the need to satisfy the needs of domestic customers as well as meeting export contracts.

The latest analysis by Energy Quest points to continuing flow of gas south from Queensland into domestic markets in NSW and Victoria. Gas is also flowing south from the central Australian Cooper Basin into the South Australian market.

The unprecedented $200 billion invested in the LNG industry over the past nine years is starting to show through in rapidly rising export income that is now running through $2 billion a month – and is therefore of enormous importance to the national economy.

Literally feeding that enormous export machine is a big task, in technical and logistical execution; and it is reliant on continuing exploration and development, in the case of both onshore and offshore facilities on eastern, western and northern extremities of the continent.

Investment in this industry is sometimes mistakenly considered as concluded. In fact, in their efforts to frustrate further development, anti-gas activists do their best to encourage the uneducated to believe that the investment is finished.

The truth is that further investment of tens of billions of dollars will have to be added to the $200b already spent if Australia is to take and hold its places as the next world leader in LNG exports.

In the past few years this has been a difficult point for resource developers to address, as they have battled a big drop in the commodity price and a big debt-servicing burden from the construction phase.

This dented confidence in the financial outlook for some operators – another aspect activists attempted to seize upon. However, debt-reduction initiatives and operational improvements are starting to kick in at the same time as the industry enjoys a modest recovery in the commodity price.

As Energy Quest’s Graham Bethune noted this week, this has encouraged improved optimism for the future and the investment which will be necessary to support the new jobs and expansion in resource tenements such as those owned by Arrow.

“The whole thing’s a huge vote of confidence,” Mr Bethune said.

“Arrow’s Surat Basin gas fields are among the largest on the East Coast,” he said.

“And a 27-year agreement is an extraordinarily long period. The only reason they would sign such a deal is because they believe there’s a long-term future in exporting LNG from Gladstone, which I’d agree with.”

While most of the anticipated 1000 new jobs created by the deal will be based in the Surat Basin (south-western Queensland), Mr Bethune said the project helped lock- in certainty for employees on Gladstone’s Curtis Island – the sight of the three new East Coast LNG export plants, built at a cost of more than $70 billion.

At its construction peak, the Curtis Island workforce totalled 40,000.

The Queensland Government may reap as much as $500 million a year in royalties from the three export operations in years ahead.

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