Bass Strait’s $300b bo­nanza fu­els more hope

The Weekend Australian - Travel - - Resources - Keith Orchi­son

IN the 40 years since the dis­cov­ery of oil in Bass Strait, the Gipp­s­land Basin op­er­a­tion has de­posited $300 bil­lion (in to­day’s money val­ues) in fed­eral gov­ern­ment cof­fers, ac­cord­ing to in­de­pen­dent modelling — and there is a lot more to come.

Mark Nolan, chair­man of ExxonMo­bil Aus­tralia, says it is con­fi­dent that there are 20 more years of pro­duc­tion ahead. The coun­try’s largest oilfield, King­fish, con­tin­ues to be an im­por­tant con­trib­u­tor and has al­ready de­liv­ered more than a bil­lion bar­rels.

The King­fish, Hal­ibut (oil) and Bar­ra­couta (gas) dis­cov­er­ies by what was then Esso Ex­plo­ration Aus­tralia and its joint ven­turer, now BHP Bil­li­ton, gen­er­ated huge ex­cite­ment in the late 1960s, trans­form­ing Aus­tralia’s oil sup­ply sit­u­a­tion from al­most com­plete de­pen­dence on im­ports to sub­stan­tial self-suf­fi­ciency. At the time, crude oil was our most costly im­port.

The Bass Strait fields, with sub­se­quent dis­cov­er­ies, have yielded more than 3.5 bil­lion bar­rels of oil (556 bil­lion litres) and al­most six tril­lion cu­bic feet of nat­u­ral gas — nearly 63 per cent of Aus­tralia’s oil pro­duc­tion and al­most 30 per cent of cu­mu­la­tive gas pro­duc­tion. The fields are among the most prof­itable in the world for the two re­source gi­ants.

Modelling of the eco­nomic value un­der­taken by Econ­tech for ExxonMo­bil es­ti­mates that the Gipp­s­land op­er­a­tions have added about $2.2 bil­lion an­nu­ally to Aus­tralia’s GDP (in in­fla­tion-ad­justed terms) and stim­u­lated more than 50,000 jobs in Vic­to­ria.

The de­vel­op­ment has de­manded mas­sive in­vest­ment, and not only by ExxonMo­bil and BHP Bil­li­ton. Econ­tech cal­cu­lates that the av­er­age an­nual cap­i­tal out­lay by other busi­nesses stim­u­lated by the Bass Strait projects over four decades has been $700 mil­lion (in­fla­tion-ad­justed), or 1.5 per cent of Aus­tralian capex spend­ing.

There are now 18 off­shore plat­forms and three sub­sea fa­cil­i­ties in Bass Strait car­ry­ing oil and gas to shore at Long­ford, near Sale, through 1000 km of on­shore and off­shore pipe­lines. Con­se­quently, at Barry Beach there is a con­struc­tion site for off­shore plat­forms and a marine sup­ply ter­mi­nal for a fleet of drilling ves­sels and sup­ply boats.

To­tal cu­mu­la­tive in­vest­ment in in­fras­truc- ture to de­velop, pro­duce and process crude oil and gas stands at more than $12.5 bil­lion.

Ex­tend­ing the life of the pe­tro­leum prov­ince also re­quires on­go­ing large ex­pen­di­ture. ExxonMo­bil says the joint ven­ture has out­laid $100 mil­lion on seis­mic in­ves­ti­ga­tion this decade and $300 mil­lion since 2002 on drilling wells around the King­fish, Bream, Hal­ibut and Fortes­cue plat­forms.

The re­wards have been an ad­di­tional tril­lion cu­bic feet of nat­u­ral gas re­serves and a ca­pac­ity to sus­tain oil liq­uids pro­duc­tion at 127,000 bar­rels a day, well short of the fields’ 500,000 bar­rels a day out­put at their peak, but still a healthy con­tri­bu­tion to cor­po­rate and tax in­come.

Just the 30,000 bar­rels a day of liq­uids added by re­cent drilling ex­plo­ration is worth about $1 bil­lion a year on present oil prices — and a sub­stan­tial fur­ther con­tri­bu­tion to fed­eral gov­ern­ment rev­enue.

ExxonMo­bil, BHP Bil­li­ton and San­tos are now en­gaged in a joint ven­ture to de­velop the Kip­per field, an al­most $1 bil­lion project which is the largest un­der­taken since the dis­cov­ery of the ini­tial trio of fields. When Kip­per comes into op­er­a­tion in 2010 it is ex­pected to de­liver the part­ners 620 bil­lion cu­bic feet of nat­u­ral gas and 29 mil­lion bar­rels of con­den­sate and liq­uid pe­tro­leum gas over its life­time.

ExxonMo­bil and BHPB are al­ready at work on the next project be­yond Kip­per — the de­vel­op­ment of the Tur­rum field, es­ti­mated to hold 800 bil­lion cu­bic feet of gas, from a new plat­form linked to its ex­ist­ing Marlin struc­ture. First gas pro­duc­tion is planned for 2011.

‘‘ There are sub­stan­tial gas re­sources re­main­ing in the Gipp­s­land Basin,’’ says Mark Nolan, not­ing that the joint ven­ture has added enough gas to its re­serves in the past three years to power a city the size of Ade­laide for two decades. ‘‘ We are now plan­ning to be­gin a com­pre­hen­sive eval­u­a­tion of gas po­ten­tial deep un­der our ex­ist­ing fields.’’

Un­der­pin­ning the fo­cus on gas is a sig­nif­i­cant change to the po­lit­i­cal cli­mate: green­house gas abate­ment, a ma­jor is­sue for all sides of pol­i­tics. ‘‘ Gas,’’ Nolan says, ‘‘ can pro­duce up to 70 per cent fewer emis­sions than coal in power gen­er­a­tion.’’

With as much as 20,000MW of gas-fired gen­er­a­tion un­der con­sid­er­a­tion for de­vel­op­ment in Aus­tralia over the next 20 years — most of it for the east­ern states — and each 1000MW com­bined-cy­cle gas plant con­sum­ing 70 PJ a year, the power sec­tor is now a ma­jor tar­get for gas sup­pli­ers.

As the ma­jor po­lit­i­cal par­ties are com­mit­ted to in­tro­duc­ing an emis­sions trad­ing scheme from 2011-12, nat­u­ral gas will be a big ben­e­fi­ciary of charges im­posed on en­ergy users and power sta­tions.

When car­bon cap­ture and se­ques­tra­tion be­comes com­mer­cially vi­able, the Gipp­s­land Basin op­er­a­tors might also stand to gain from sys­tems that will de­liver liq­ue­fied car­bon diox­ide from power sta­tions for stor­age in de­pleted oil and gas wells.

Rob Young, ExxonMo­bil Aus­tralia gov­ern­ment af­fairs ad­viser, is cau­tious, how­ever, about this prospect. ‘‘ Gipp­s­land Basin cer­tainly has po­ten­tial as a stor­age site for car­bon diox­ide,’’ he says, ‘‘ but the re-in­jec­tion of CO into or near op­er­a­tional oil and gas fields also presents sig­nif­i­cant risk and in­tegrity is­sues to per­son­nel, pro­duc­tion and in­fra­struc­ture. Th­ese risks may not be man­age­able from ei­ther a tech­ni­cal or a cost per­spec­tive.

‘‘ On­go­ing anal­y­sis is needed be­fore the com­mer­cial and tech­ni­cal vi­a­bil­ity of any CCS project in the basin can be de­ter­mined. En­thu­si­asm for the pos­si­bil­i­ties needs to be tem­pered by an ac­knowl­edge­ment that broad im­prove­ments in per­for­mance, cost and in­tegrity of CCS sys­tems and com­po­nent tech­nolo­gies re­quires much fur­ther re­search.’’

He says the com­pany has ad­vised the Co­op­er­a­tive Re­search Cen­tre for Green­house Gas Tech­nolo­gies on a fea­si­bil­ity study for stor­age of car­bon emis­sions in the Gipp­s­land Basin and, with Chevron and Shell, is also par­tic­i­pat­ing in a sim­i­lar in­ves­ti­ga­tion in West­ern Aus­tralia as part of the de­vel­op­ment of the large Gor­gon LNG project.

Young says sug­ges­tions that de­pleted reser­voirs will be avail­able in the Gipp­s­land Basin by 2015 are ‘‘ overly op­ti­mistic’’. A time­frame of 2025 or later would be more re­al­is­tic, he says, and even this would de­pend on how suc­cess­ful the joint ven­ture is in ex­tend­ing the pro­duc­tion life of its fields.

Sixty years or more of pro­duc­tive life is not a bad out­look for an area that in the 1950s had been deemed un­wor­thy for ex­plo­ration as one of the world’s rough­est stretches of wa­ter ad­ja­cent to a coast where 140 un­suc­cess­ful wells had been drilled in the pre­vi­ous 40 years.

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