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18 Oct. 2017

Key gas fields nearing end, but news not all bad

Richard J Owen Chairman, ExxonMobil Australia

Throughout my career as an engineer, I’ve been trying to explain the complexities of energy. Now, all of a sudden, people are listening. I’m no longer the most boring guy at the barbecue.

The gas business has changed considerably over my career, and it continues to change as new technology is rapidly developing.  

Over the last 24 months, our Gippsland operations have been able to do the heavy lifting to meet unprecedented east coast gas demand by increasing our production well above our forecast levels. Achieving this is not as simple as turning the tap harder. It requires exceptional work from our production teams and precision maintenance coordination across our onshore plants and offshore platforms.

As a result 2016 was our highest gas production year ever, supplying 19 percent of east coast demand, with similar production levels expected this year. But accelerated extraction inevitably means accelerated decline, especially in an operation that’s already exceeded expectations. 

Some have expressed surprise that we cannot sustain these high production levels for an extended period, but this is simply not possible if the gas is not there to produce.

Our success over generations has led to complacency and an unrealistic dependence on our Bass Strait fields. The Gippsland basin is not a magic pudding – we are not sitting on a great big endless gas resource, as some seem to think.

But it is not all bad news. While Bass Strait today has only 5 percent of the east coast’s remaining proven and probable gas resources, I can assure you we have the best geoscience and engineering minds working on ways to develop what we have left, to maximise reliable supply through our Longford gas plants for as long as we can.

We are witnessing the growing importance of natural gas to energy demand, due largely to global efforts to address emissions and climate change and the need to support increasing use of wind and solar energy in power generation.

Unfortunately, this increased gas demand at home and abroad also coincides with the natural decline in the three Esso-BHP Gippsland fields that have been the mainstay of the eastern Australian gas market for almost half a century.

Most of Gippsland’s gas was contained in these three “sisters” – Marlin, Barracouta, and Snapper. They were discovered in Australia’s first offshore exploration drilling program, launched when Robert Menzies was Prime Minister back in the middle of the last century. 

Since those discoveries, widespread exploration of the Gippsland Basin by many companies has resulted in hundreds of multi-million dollar dry holes and many small, uneconomic gas discoveries.

Initially, we expected that our big three fields would last about 20 to 30 years. However, thanks to many advances in technology coupled with excellent ideas and innovation from scientists and engineers, they have produced for almost half a century. For most of that time, we were able to make available more gas than the market needed.

But now the three sisters are coming to the end of their lives.

About 10 years ago, our project engineers designed an innovative plan to develop three smaller fields together in one big project. This allowed us to develop remaining Menzies-era gas in Tuna and the deep Turrum field as well as a new Bob Hawke-era field called Kipper. This is a smaller, complex field containing sour gas, which requires extra processing before it can be sold to the market.

At more than $5.5 billion, this Kipper, Tuna, Turrum Project – completed earlier this year – was the largest single investment ever into Australia’s domestic gas supply. It will help to continue production through the Longford plants in the wake of the three sisters’ decline.

Today’s increased east coast gas demand raises potential new exploration opportunities in Bass Strait.

Using the latest super computer processing capacity, our geoscientists reprocessed old 3D seismic data with new algorithms. After detailed analysis of the results, they identified new prospective drilling targets and as a result we have acquired our first new Bass Strait exploration acreage in over 20 years.

Next year, we will spend around $100 million in a highly uncertain deep-water exploration drilling program in this acreage, in the hope of finding new, Turnbull-era gas for the market.

If we succeed, our engineers will face the challenge of designing a way to develop the resources at a cost that could compete with the many other developments on the east coast as well as potential pipeline or LNG imports.

Energy is a complex challenging industry requiring world-class technical minds and deep pockets.

 

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