Gas Prices Spark Santos to Revitalize Cooper Basin
Due to growing export demand and the potential for carbon-price-driven gas power stations, Santos will launch a $120 million drilling program to revitalize the 40-year-old Moomba gas plant located in the Cooper Basin gas fields.
Moomba, 67 per cent owned by Santos, 20 per cent by Beach Energy and 13 per cent by Origin Energy, currently produces about 300 terrajoules of gas daily.
Santos would like to bring the plant closer to production levels of its prime – about 700TJ daily. Moomba has cost $8 billion to develop thus far.
The real driver for the Moomba plant was an oil-price-linked supply deal with the Santos-led Gladstone Liquefied Natural Gas plant (to read more about the Gladstone LNG project, click here).
The $16 billion USD plant, in which Santos has a 30 per cent stake, will mostly use Queensland coal-seam gas, but it will also take 10-15 per cent of its gas from the Cooper Basin.
The drilling will test the Cooper Basin's potential for shale gas.
David Knox, chief executive of Santos, said shale gas could be produced from Cooper if eastern state gas prices rose from $3-$4 a gigajoule to about $6.
Technology that releases gas from shale rock by fracturing (also known as fracking) the rocks underground had turned a US gas shortage into a glut, which is now disappearing as economies rebound (read more about this here).
"We'll do conventional and slowly move into the unconventional over time," Mr Knox said. "We're not talking one or two years. We're talking in the next 10-20 years."
Beach managing director Reg Nelson, who was also visiting Moomba, said his company had other shale gas ground he was hoping to have in production "in a matter of years, not decades".
Mr Nelson said one of the key concerns in the US had been contamination of water.
"From the nearest potable aquifer to where we are looking in terms of distance, there's around 1500m to 2000m, so the probability you'll contaminate any aquifers with fracking is zero," he said.
According to James Baulderstone, Santos eastern Australian VP, the price necessary to realize the Cooper Basin's shale potential would not necessarily mean a big rise in retail gas prices.
"The wholesale gas price is $4 (a gigajoule) roughly. What you pay when you turn on your stove is $21," he said.
"Even if that price doubled, it would only add another 20 per cent on to their price, so we are very comfortable."
The price movement needed to make these large volumes of gas economic "isn't very significant
Knox said the Cooper Basin could continue to supply gas for 50 years.
Source: The Australian