LWP BLOG – Could the Gladstone gas guzzle galvanise Australian gas exploration?

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Could the Gladstone gas guzzle galvanise Australian gas exploration?

Australia’s gas market could fairly be said to be heading for a crisis as the big three LNG export plants in Gladstone guzzle gas supplies, big onshore gas resources in Queensland and New South Wales remain undeveloped, and concerns grow about domestic supplies.

Demand from the Gladstone export plants is outstripping that state’s supply as coal seam gas (CSG) supply falls short of expectations. As well, gas exploration moratoriums and restrictions in New South Wales, Queensland and Victoria are also restricting supply.

Victoria has permanently banned exploration and development of all onshore unconventional gas – including CSG and shale and “tight” gas extracted by fracking – and has a moratorium on any onshore gas development until 2020.

The New South Wales CSG industry has effectively been in limbo since March 2014 when the government implemented a moratorium on the granting of new exploration licences. In 2016, it proposed lifting the moratorium and approving projects on a case-by-case basis but the recent change of premier has pushed that on to the back-burner.

The Northern Territory also has a moratorium on onshore unconventional gas activity. Queensland, on the other hand, has released over the past two years about 11,500 square kilometres for exploration.

According to the Australian Petroleum Production and Exploration Association, gas exploration activity has fallen to its lowest level since 1981 and eastern Australia faces a supply shortfall in 2019.

Something has to give.

With LWP’s efficient, low-cost fly ash-based ceramic proppant technology an essential part of fracking drilling, we’d love to see a revival of gas drilling activity in Australia.

The perfect example of what can happen when there is a change of government, or change of government thinking, is the situation in the US over the past few months.

We wrote in this blog in December of the upsurge in oil and gas drilling activity that followed the November election of Donald Trump as President of the United States and the announcement by OPEC of its first agreement to cut oil output since 2008 – both events that galvanised the oil price.

Back then, the Baker Hughes tally of oil rigs in action was at 498, its highest level since the start of 2016, while the total active US rig count – which includes gas rigs – was at 624.

Last week, the Baker Hughes survey showed 566 oil rigs operating, the most since November 2015, and a total active US rig count of 712 rigs.

It’s the biggest recovery in rig numbers since a global oil glut sent the oil price – and market activity – plunging in 2014. (The oil rig count record is 1,609 in October 2014, while the record total rig count is 2010, reached in October 2011).

The upsurge in US drilling activity is great to see.

It’s a different situation to Australia with different drivers of activity but we’d love to see some of that US optimism rub off on our home market.