Major reserves of shale gas could cause upheaval in the sector.
FROM gas famine to gas glut; that’s the game-changing potential for Perth from a deep-drilling test planned for the Dongara area over the next few months, which is sure be watched by everyone with an interest in the oil and gas industry, especially financially troubled Rick Stowe.
The Woodada Deep No.1 has the potential to unleash a totally new source of gas for the south-west of Western Australia, under-cutting the price of gas delivered from the North West Shelf and triggering a rush by explorers to cash in on the local potential of a gas-revolution sweeping the world.
Shale gas is the target of the well to be drilled by AWE, operator of a tenement which first attracted investor attention in 1980. That was when Strata Oil discovered the Woodada gasfield in sandstone, giving Perth a much-needed source of gas as production slowed from the older Dongara fields, and before North West Shelf gas arrived.
But, 30 years ago, no-one at Strata bothered to test gas ‘kicks’ observed in much harder layers of shale in the discovery hole.
Why would they? Shale can be as hard as concrete and extracting any gas back then would have been the equivalent of trying to get blood out of a stone.
But times change, and so does technology. In the US, gas is being extracted from shale thanks to clever drilling techniques and smart ways of ‘cracking’ the hard rock with the use of high-pressure water, plus sand, and diluted chemicals to allow trapped gas to flow.
From zero shale gas production just 10 years ago, this new source now accounts for around 16 per cent of total US gas supply, driving down the price of domestic gas to its lowest in seven years and forcing foreign suppliers of liquefied natural gas to reconsider plans to export to the US.
So revolutionary, and so important, is this new gas source that a ‘pegging’ rush is under way in Europe, and China has also started looking for gas-bearing shale, a rock type found around the world.
Even the International Energy Agency has got in on the act, warning that shale gas and other ‘unconventional’ gas sources, such as coal-seam methane, could lead to a global gas glut, with price-depressing implications for gas prices.
Mr Stowe, however, will not be celebrating like the rest of Perth should AWE successfully encounter gas-rich shales in Woodada Deep No.1 because he is the man who took control of Woodada after its discovery, and then sold it as gas-production declined – without ever knowing that it might actually be the goldmine he had hoped for, and now needs.
If Mr Stowe had kept Woodada it could be the source of cash needed to save his Griffin Coal, and other business interests, which are facing an uncertainty future thanks to a banking squeeze.
For the rest of Perth, and the entire oil and gas sector, the Woodada Deep No.1 will be the first look at whether shales in Australia have the same gas-producing potential as the famous Barnett and Marcellus shales in the US, geological features which are why the world’s biggest oil company, ExxonMobil, is paying $US41 billion for shale specialist XTO Energy.
As for WA’s north-west gas producers, which need to sell their gas to industry in the south-west of the state, the Woodada Deep No.1 test is a worrying development which, if successful, could price them out of the market if gas is found in sufficient quantities, and can be extracted without damaging the environment.
MORE gas on Perth’s doorstep is not the only game-changing event under way today. The return of the boom means that Perth is in danger of becoming ‘by-pass city’.
Workers, the people needed to make a place liveable, are avoiding Perth and going direct to the high-paid jobs on offer in the north.
Blame for this development is being levelled at the over-crowded Perth airport, and perhaps there is some truth in that. The place is a shambles, and will remain that way for at least the next decade as the owner struggles to match demand with supply – such as adding a new runway.
What’s so interesting about the worker by-pass, with flights now being made direct from the east coast to the north-west, is that it is actually an extension of a trend first noted in the gas industry.
Failure to agree to an onshore processing site for gas from the Ichthys field off the Kimberley coast means WA gas will be piped to Darwin for processing, as could gas from other fields, including Woodside’s Browse Basin development, if protestors about the preferred James Price Point site have their way.
What that means is that WA risks becoming the BP (by-pass) state, with foreign and east coast investors parachuting in to plunder the natural resources, trouser the profits, and depart without leaving a footprint.
If that sounds a little exaggerated think about what’s happening with workers already being offered the choice of living in Sydney and working here, and gas being sucked out of WA and sent to Darwin.
GENERATIONAL change is never easy, especially for the rich, as the children of wealthy people such as Alan Bond, Kerry Packer and Robert Holmes a Court have discovered.
Not only are you subject to greater scrutiny and accusations of getting a free ride based on daddy’s influence rather than your own ability, there is an intensified fear of failure as you try to wear his shoes.
Todd Bennett’s sudden departure from Apex Minerals is the latest example of a boy thrust into a man’s job because his mum, Angela Bennett, is an heir to the iron ore fortune of the late Peter Wright.
Mr Bennett will not be the last of Perth’s young heirs who find life a lot tougher than they expected; such is the curse of rich parents.
“The fundamental defect of fathers is that they want their children to be a credit to them.”