Australia’s NT to Lift Moratorium
The hydraulic fracturing moratorium in Australia’s Northern Territory will be lifted, the NT government announced April 17, but there remain some industry concerns about the manner in which it will be done.
“We promised an independent, scientific inquiry after which we would either ban fracking or allow it in highly regulated circumstances in tightly prescribed areas. We have kept our promise,” the Top End’s chief minister Michael Gunner said.
“We have accepted the key finding of the report – that if all the recommendations are implemented the risk from fracking can be reduced to an acceptable level,” he said. The decision comes almost 19 months after the NT government announced the moratorium so that the evaluation could be done on the impact to the environment.
Australia’s oil and gas upstream lobby group Australian Petroleum Production and Exploration Association (Appea), and two gas producers and LNG exporters, Origin and Santos, all welcomed the news, with the two producers saying they’re ready to move in as soon as possible, and Appea flagging some concern with the government’s timeframe for lifting it.
The NT government announced it will implement all of the inquiry’s 135 recommendations and that work on a detailed implementation plan will begin immediately and be completed and released to the public in July.
Appea flagged that the way in which they are implemented will be critical in determining the commercial viability of the industry and noted that 30 of the recommendations must be brought into effect before exploration activity can resume. “If they are to be implemented, they must be addressed within the next six months to ensure the industry can be on the ground exploring in the 2019 dry season,” Appea NT director Matthew Doman said.
“Businesses contractors and workers in the Territory are counting on the quick ramp up of the gas industry to get the Territory moving again. Explorers are ready to resume their activities as soon as the government gives the green light,” he said.
Santos CEO Kevin Gallagher said: “Santos does not want to let [Territorians] down and we will be ready to go in in the 2019 dry season. 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.
“Implementing the conditions for onshore gas exploration by the end of 2018 and getting the regulatory framework in place to allow onshore gas development by 2021 is vitally important to deliver a viable onshore gas industry as well as the desperately-needed economic and social benefits Territories are counting on,” he said.
He also said that there is a window of opportunity to grow LNG exports as a global supply gap is expected in the early to mid-2020s.
Santos leads the Gladstone LNG project on Australia’s east coast and a gas pipeline connecting the Northern Territory to Queensland, for the first time, is being built and expected to be completed by the end of the year.
Fellow east coast LNG player Origin Energy also welcomed the news and said it was keen to resume its NT exploration as soon as practical. “Well testing completed just prior to the moratorium indicated there was a very promising, material gas resource in the Beetaloo sub-basin,” Origin executive general manager Mark Schubert said. “We now plan to resume work as soon as practical, adopting the recommendations of the Scientific Inquiry and gaining the necessary approvals to complete our remaining exploration and appraisal commitments,” he said.
Origin plans to drill and fracture stimulate a further five wells to complete existing exploration permit commitments put in place prior to the moratorium being introduced in September 2016.
RBC Capital Markets analyst Ben Wilson said the Beetaloo is a multi-trillion cubic feet onshore play driven by a quality depositional setting and reservoir characteristics akin to US gas plays including the Marcellus and Barnett shales.
“As shown by the initial booking of gross 6.6tcf of 2C Resource by Origin and a preliminary assessment of the Lower Kyalla from Origin, the Beetaloo is not just one play but a series of stacked plays which increase the appeal further,” he said. “It has the added advantage of being broadly connected to two export routes (Darwin and Gladstone via the under construction NEGI line),” he said.
He said that, all going well, drilling and fracking are expected to resume in 2019 with any future development being impacted by the cost of implementing the recommendations.