24/07/2009 - 09:31

State to halve tight gas royalties

24/07/2009 - 09:31

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The state government will halve the royalty rate for tight gas operations in a bid to substantially boost Western Australia's gas supply.

State to halve tight gas royalties

The petroleum industry has welcomed the state government's plan to halve the royalty rate for tight gas operations as part of a strategy to substantially boost Western Australia's gas supply.

Mines and Petroleum Minister Norman Moore today announced that the royalty rate will be reduced from 10 per cent to 5 per cent.

Tight gas is found in low permeable rocks and requires different and more expensive start-up and operational costs compared to other petroleum producers.

"The tight gas industry is in its very early stages and the State Government needs to remove hurdles and encourage investment in this area whenever it can," Mr Moore said.

"Where an offshore petroleum producer may drill 10 to 20 wells, a tight gas producer needs to drill 200 to 300 wells to maintain production levels."

The Australian Petroleum Production and Exploration Association WA director Tom Baddeley said the move was a positive policy initiative that recognised the need to stimulate investment in unconventional gas fields.

"Unlocking the tight gas of the Perth Basin has the potential to significantly boost domestic gas supply and government initiatives like this will help attract new entrants and diversity," he said.

"The Minister is to be applauded for pulling the right levers.

"WA has an abundance of clean, natural gas. Incentives like this will further underpin long term supplies of gas to support the State's long term energy needs."

 

The announcements are below:

 

The State Government has announced it will reduce the royalties rate for tight gas, a decision which has the potential to significantly boost Western Australia's gas supply.

The royalties rate, which applies to the value of the gas at the wellhead, will be reduced from 10 per cent to five per cent for tight gas.

Mines and Petroleum Minister Norman Moore said the State Government had recognised the tight gas industry had different start up and operational costs to other petroleum producers.

"The tight gas industry is in its very early stages and the State Government needs to remove hurdles and encourage investment in this area whenever it can," Mr Moore said.

"Where an offshore petroleum producer may drill 10 to 20 wells, a tight gas producer needs to drill 200 to 300 wells to maintain production levels."

The Minister said that tight gas, which was found in low permeable rocks and required special equipment for extraction, had enormous potential to become an alternative energy source for WA.

"North America has used tight gas for decades and unconventional gas, which includes tight gas, is increasingly becoming part of the United States energy supply," he said.

"Tight gas supplies something like 35 per cent of the US gas market."

Mr Moore said that although WA's tight gas sector was still in its infancy, there were significant possibilities for the industry.

"The Perth Basin could hold between nine and 12 trillion cubic feet of tight gas," he said.

"That is enough gas to supply WA's domestic needs for up to 30 years.

"Many of these tight gas fields are also located near industry that is heavily gas reliant."

The royalty relief can be applied immediately for small to medium-sized fields, and portions of larger fields, at the discretion of the Minister for Mines and Petroleum.

The Minister said legislative amendments were required for the total area of larger fields and he was confident the necessary changes would be implemented.

 

APPEA

 

The Australian Petroleum Production & Exploration Association (APPEA) has applauded the West Australian Government's decision to encourage the development of the tight gas industry by halving the royalty rate for 'tight' gas production.

The State Government today announced that it will reduce the royalty rate applied to the value of tight gas at the wellhead from 10 to 5 per cent. APPEA has previously identified a reduction in royalties in selected onshore areas as an important measure that could assist in stimulating exploration in frontier areas.

APPEA Director WA, Tom Baddeley, said the move was a positive policy initiative that recognises the need to stimulate investment in unconventional gas fields.

"Unlocking the tight gas of the Perth Basin has the potential to significantly boost domestic gas supply and government initiatives like this will help attract new entrants and diversity," said Mr Baddeley.

"The Minister is to be applauded for pulling the right levers," he said.

While tight gas has been part of the North American energy supply for some time, the sector is still in its infancy in Western Australia.

Fiscal measures are one of the most effective policy tools at the disposal of governments (both state and federal) in which to stimulate exploration.

"WA has an abundance of clean, natural gas. Incentives like this will further underpin long term supplies of gas to support the State's long term energy needs," said Mr Baddeley.

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