SOUTH PACIFIC

Discoveries go on with subdued activity

The region’s future depends on new oil discoveries and securing long-term contracts for its remote, growing offshore-gas reserves

Australia

Australia’s real GDP increased an average 4.4% annually from 1994 through 1998 and 3.9% in 1999. Only a slight decline to about 3.5% is forecast in 2000. Australia’s energy demand is increasing 3.5% per year. Even with high oil prices, development and exploration spending is forecast to fall 12.5% to $1.25 billion in 2000.

Oil and gas satisfy 54% of Australia’s energy needs. Oil self-sufficiency will fall from 80% to about 65% by 2010 without substantial new reserves. Gas needs are supplied 100% domestically, and gas is forecast to increase its share of the country’s energy mix to 28% by 2010.

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Exploration. In 1999, exploration investment fell for the second year and is expected to be $589 million in 2000, down 20.8% from 1999.

    Offshore investment is projected to drop 27% to $480 million in 2000, with activity remaining strongest in Carnarvon basin. Eleven offshore oil and gas fields were discovered during 1999. Significant discoveries were made in the Carnarvon basin, with gas fields found at Geryon, Lee, Narvick, Orthrus and Cadell; oil fields were discovered at Sage, Nasutus, Moon, Coaster, Gipsy and Enfield.

The 2000 acreage release offered 86 areas for offshore petroleum exploration. This was 28 more areas than in 1999, a record number. These are the only exploration areas to be released this year.

Bids for 44 of the areas offered will close November 2, 2000; the remaining areas close May 3, 2001. All bids will be assessed under the work-program bidding system, wherein explorers benefit from updated guidelines announced in April that provide greater flexibility and clearer guidance to potential bidders, including application of profit-related, resource-rent tax. Exploration permits will be awarded for six-year initial terms.

A major geological discovery, comprising at least 35,000 sq mi in Fairway basin, was made during a research cruise of French and New Caledonian institutions. About 100 large domes – many 3,000 ft high and more than 6 mi long – containing 100 million-year-old sediments were discovered in water 6,000 to 10,000 ft deep. Gas hydrates were also found in the area, suggesting an active hydrocarbon system. The implications for new prospects are obvious.

Drilling/development. The 202 wells drilled in 1999 represent the lowest level since 1994, mostly due to reduced onshore exploration drilling. Although the number of wells drilled in 2000 is expected to rise slightly, activity is not likely to return to pre-1998 levels. Offshore, 51 wells were for exploration and 41 were for development. Onshore, there were 44 exploration wells and 40 development wells.

While Australia’s drilling rate, overall, will be flat with 1999, activity should still be brisk offshore Western Australia. (Photo courtesy of Apache Corp.)

In February 2000, Chevron assumed operatorship of all WAPET assets, including Gorgon. The partners (Mobil, Texaco, Chevron and Shell) plan to build a pipeline to Western Australia for Gorgon gas and one or more LNG trains, beginning exports by 2004. Successful development hinges on long-term supply contracts, especially for LNG.

In March 2000, a letter of intent was signed by Shell Development Australia, Woodside Energy and Methanex Corp. to supply gas for a new, syngas-generation and 3 million-t/yr methanol facility in Darwin. Anticipated startup date of the plant is 2005. The parties have signed a letter of intent specifying supply of about 280 MMcfgd.

The Methanex project would lay a foundation for the Northern Australia Gas Venture (NAGV), a partnership between Shell Development Australia and Woodside Energy Ltd. NAGV has considerable discovered and potential gas fields in the Timor Sea. NAGV plans to construct a $2.5-billion gas production facility in the Timor Sea and a 300 mi-long pipeline to Darwin.

The North West Shelf project, a consortium with Woodside as operator, is the only current LNG-export source (mostly Japanese-bound). In November 1999, Australia LNG (ALNG), a marketing organization created to match Asian LNG demand with Australian suppliers, signed an MOU with Taiwan’s Tuntex for Australian LNG imports, pending Tuntex’s securement of LNG customers. If finalized, the agreement would increase Australian-LNG exports by 50%; deliveries could begin as early as 2003.

The North West Shelf project is bidding for $15 billion in LNG sales to Chinese state-owned gas buyers in Guandong and Shenzhen in 2005. China said a key element would be Canberra’s support for Beijing in its dispute with Taiwan.

In January 2000, Magellan Petroleum and partners announced gas reserves of 750 Bcf in the onshore Palm Valley field. More wells will be drilled to fill existing contracts, but these will exploit only a small amount of the field’s total reserves.

Technical problems slowed development on Canadian-based Suncor’s oil-shale project near the Great Barrier Reef. The project aims to produce an estimated three billion bbl of oil.

Production. Crude and condensate production decreased in 1999 to 500,000 bpd from 535,000 bpd in 1998. However, this year should see increases from redevelopment in the North West Shelf Wanaea-Cossack project, first oil from the Laminaria-Corallina FPSO in the Timor Sea, and the Buffalo project offshore Western Australia. Development of Legendre, Puffin and Wollybutt fields will likely mean further production increases in 2000.

BHP is Australia’s largest oil producer, and the Bass Strait area – in Gippsland basin – is BHP’s largest asset, with production of about 200,000 bopd and 550 MMcfgd. BHP and partner Esso plan an 80% increase in production by 2004 in their Bass Strait fields. BHP’s offshore Minerva and Kipper fields in Gippsland basin could see production boosted to 150 Bcfg annually by 2003 – 2004 for supply to a planned urea plant.

The deepwater, Blackback field development saw first oil in mid-1999. Development there comprises three, subsea production wells tied back to the existing Mackerel platform in Bass Strait. Production from the BHP-operated Buffalo oil field, offshore Western Australia, began in December 1999. BHP is also considering gas supply to Tasmania by 2002.

Aggressive exploration efforts resulted in proven gas reserves rising to 44.6 Tcf by January 2000 from 28.4 Tcf in 1998; large reserves increases are likely to continue. The Australian Gas Association reported that gas consumption would double by 2015 from its 1998 total of 1.1 Tcf (including exports). However, demand is not keeping pace with supply increases; so, export projects become essential to avoid oversupply.

Excluding shale oil, proven crude and condensate reserves increased to 2.9 billion bbl from 1.8 billion during the January 1999 – 2000 period.

Australian discoveries, 1999 – 2000