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Queensland's chance to cash in on looming gas supply crisis

Business

The predicted gas supply shock in 2023-24 has not been averted by COVID_19 recession and will still hit with brutal force, according to Central Petroleum chairman Wrix Gasteen.

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An urgency has already hit the gas sector and companies like Central Petroleum are gearing up to try to fill the void. But it won’t be enough.

“It’s a gaping hole that is opening up,’’ Gasteen said.

“And it will take more than one solution.’’

After hitting the pause button in March when Covid-19 lockdowns started, along with the price shock from falling demand and the Russia-Saudi Arabia standoff over oil, Central Petroleum has fired back up.

Along with other gas producers, there is an urgency to try to fill that gaping hole he predicted.

But while Australia has an abundance of gas it has fallen well behind in developing it.

According to EnergyQuest’s Graeme Bethune, at current production levels, the east coast has about 18 years cover of proved and probable reserves (which are only 50 per cent likely) and only 10 years of proved reserves (90 per cent likely).

“East coast reserves are only 55 per cent of those on the west coast and are actually inadequate to support the three LNG projects at Gladstone plus the domestic gas market without significant new finds and/or imports,’’ Bethune said in a recent opinion piece.

Analysts Wood Mackenzie have also said much of the contingent resources may not be developed in time.

“No one can predict how fast replacement gas can be found,’’ Gasteen said.

“When you look at solutions, there is no single solution. There are a plethora of single activities which will need to happen.

“A west to east pipeline – it’s an option but a bloody expensive one. An LNG import terminal in Victoria … maybe that will play a role.’’

However, he doubts whether an import terminal could be built in time.

He predicts new entrants will emerge and a horrendous market failure will be averted.

“We won’t run out of gas,’’ he said.

But he said pipelines will have to be built, an argument that companies like Blue Energy have been pushing in a bid to unleash some huge reserves in central Queensland that have no way of getting to market.

Blue Energy has started a pre-feasibility study for a Bowen Basin gas pipeline and is talking with State and Federal governments about taking it forward.

But Gasteen says it will be the brownfield projects, or those close to infrastructure, that will be the likely champions.

Senex’s Atlas project is prime example while Central’s Range joint venture with Incitec-Pivot has also shown better than expected potential.

Gasteen said the company was also looking at exploration adjacent to its existing infrastructure.

“We are working with our joint venture partners and we have some pretty good ones,’’ he said (Macquarie Bank in Mareenie, Incitec Pivot at Range and it is also working with Santos).

Even if the possible solutions emerge to solve the looming east coast gas crisis, prices are going to spike, he said.

Gasteen believes that Queensland will benefit from its gas position with the likelihood that manufacturing will grow in the state because of its lower cost gas.

“Manufacturing used to be in NSW and Victoria, but if you look at the US you can see an example of what happens when you have an abundance of energy. New industries develop and it becomes more resilient,’’ he said.

“Queensland has got the gas and a Government that has a policy to release these areas. It will be the lowest cost gas and when you have low energy cosdt and industry will come.

“You get fertiliser industry, ammonia nitrate industries, plastics. Wherever you have energy at a reasonable price then you have something to offer.”

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