Oil and gas, now here comes the hard sell

The northern waters of Western Australia are among the most prospect-ive in the world for natural gas, with the industry’s challenge now centred more on selling it than finding it.

Most of Australia’s offshore exploration budget this year of nearly $800 million will be spent on the State’s north-west coast.

Nearly 20 oil and gas discoveries have been made in the past two years, although a third of these are still to be established as commercially viable. More than 40 fields produce hydrocarbons, mostly offshore.

The formal launching of the fourth train of Woodside Petroleum’s liquefied natural gas project is expected within the next six weeks, with a fifth under active consider-ation.

The North West Shelf and the Timor Sea will be the source of natural gas that could treble Australia’s current exports to 25 million tonnes a year in the next decade.

There are also a number of projects planned that will use gas as a feedstock for petrochemicals and other products, for the reserves off the Western Australian coast could support a much higher level of production than that currently envisaged. Demand in Asia for such products is expected to provide ready markets for these products.

Meanwhile, the discoveries continue to confirm that the Carnarvon Basin, in which the North West Shelf occurs, is one of the most attractive areas for exploration in the world.

It is the centre of an industry in this State which contributes nearly half of Australia’s oil and LPG, 82 per cent of its condensate (a form of light crude), nearly two thirds of its natural gas and all of the 7.5 million tonnes of LNG.

Its gas reserves are now at a level where they could supply all of the nation’s needs for many decades, providing adequate margins for increasing exports. WA is the nation’s biggest consumer of natural gas for industrial use and in the future, as this grows, will contribute more half the national total for this purpose.

Paradoxically, although WA has plentiful reserves of gas, the eastern states will have to import the fuel from Papua New Guinea and the Timor Sea (those parts which are not in Australian waters).

The current boom in exploration and development was hard to foresee in the frustrating 15 years or so it took to develop the first North West shelf gas and condensate fields.

The first major discoveries were made a third of a century ago (there were small oil and gas fields further south) but it was not until the 1980s that first natural gas was produced for local markets, and then the LNG exports began to flow.

The frustrations of those early years have almost been forgotten as exploration rigs and new platforms emerge in the waters of the North West Shelf. This year Australia’s oil and condensate production will increase by a third, most of the growth occurring in offshore fields of Western Australia.

But serious issues remain. Will Australian LNG producers be able to compete with those from Asia and the Middle East? Will they break into new markets? (Almost all our exports currently go to Japan).

Despite such concerns, Perth has gone far to fulfil the prophecy made by a Texan oilman a decade ago: “This place will become Australia’s Houston.”

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