Undeveloped Down Under

Audrey Raj

February 1, 2016

Australia and New Zealand hold vast petroleum potential, much of which remains undeveloped. Audrey Raj sets out the detail.

Samples of oil from various New Zealand discoveries. Photo from TAG Oil.

While the Australian oil and gas sector was all about the development of existing gas resources in 2015, New Zealand wrapped up the year awarding nine exploration and production (E&P) licenses in its prolific Taranaki basin, comprising of six offshore and three onshore permits.

In its latest bidding round, OMV New Zealand was awarded four offshore permits and both Todd Exploration and Mont D’Or Resources bagged one offshore license each.

According to New Zealand’s Energy and Resources Minister Simon Bridges, collectively the permits include a committed work program expenditure of about US$2.9 million (NZ$4.4 million), with the potential of more than $238 million (NZ$364 million) if all contingent work is realized.

“The result shows that the block offer approach is successfully attracting investment in New Zealand even in the face of low commodity prices, which are putting pressure on exploration companies to reduce expenditure,” Bridges says.

“Over the past three years, the block offer process has successfully increased petroleum exploration investment. Block offer 2015 consolidates these gains and confirms what the industry already knows - that the potential for Taranaki is far from reached.”

Separately, New Zealand also closed its 2016 block offer consultation in October last year, which includes one onshore and four offshore areas in the Taranaki, Pegasus and East Coast, Northland-Reinga and Great South and Canterbury basins. The block offer will be announced this March.

In 2015, Australia, too, offered 29 offshore blocks across eight basins for competitive bidding by prospective explorers, as part of it its annual Offshore Petroleum Exploration Acreage Release.

Located in the Northern Territory, the Territory of Ashmore and Cartier Islands, Western Australia, South Australia, Victoria and Tasmania, basins such as Bonaparte, Browse, Roebuck,

Carnarvon, Ceduna, Otway, Sorell and Gippsland made the list.

Out of the 29, 23 areas were made available for work program bidding and six areas for cash bidding. While round one of work program bidding closed last year, tendering for cash bidding closes in February 2016, followed by the second work program bidding due in April this year.

The provisional areas for the 2016 Offshore Exploration Petroleum Acreage Release will be available early 2016 and the final areas will be announced in June at the Australian Petroleum Production and Exploration Association (APPEA) Conference in Brisbane.

Liquefied natural gas (LNG) has also been a hot topic for Australia, with the ramp up in LNG production. According to APPEA, record investment in LNG development is helping to sustain Australia’s economic growth, and natural gas output will be more than double in the next five years.

Furthermore, over the same period, LNG exports are expected to increase from 26 MTPA to more than 76 MTPA. The Australian oil and gas industry remains a major contributor to its economy, perhaps even accounting for one-third of Australian business investment.

Similarly, New Zealand’s oil and gas sector is also a significant contributor to its own economy. The government receives approximately 42% of the operating profit of a development, through a combination of royalties, levies and taxes, according to the New Zealand Petroleum and Minerals.

Queensland Curtis LNG (QCLNG) terminal. Photo from BG Group.

Explorers in Australia, New Zealand

AWE Ltd., Bass Strait Oil, Quadrant Energy, Beach Petroleum, BHP Billiton, Chevron, Cue Energy, ExxonMobil, INPEX, Metgasco, Origin Energy, BG Group, ROC Oil, Cooper Energy, Santos, Shell, Strike Energy, Tap Oil, Woodside Petroleum and Total are some of the local and international names with footprints in Australian E&P.

Shell’s upstream business in Australia is based in Perth and it employs over 500 staff. Its major gas developments include the Prelude Floating LNG, North West Shelf, Gorgon, Sunrise, Evans Shoal and Browse projects, with a number of Shell-operated exploration interests in the Browse basin.

The North West Shelf project is a partnership between Shell, Woodside (operator), BHP Billiton, BP, Chevron and Japan Australia LNG. While BHP Billiton continues to pursue oil plays with additional acreage acquired in the Beagle sub-basin in Western Australia, Chevron’s operating interest in Australia spans across 42,000sq km of acreage.

Leading the development of the Gorgon and Wheatstone natural gas projects, in latest discoveries, Chevron found natural gas in the greater Gorgon area located in the Carnarvon basin offshore northwest Australia. The group also has two exploration permits in the Great Australian Bight (GAB) of South Australia.

A hotbed for explorers, the GAB is one of the most unexplored prospective areas, holding billions of barrels of oil and gas. In 2011, BP secured four permits in the GAB, and conducted 3D seismic between November 2011 and May 2012.

The National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA), however, rejected BP’s environment plan to drill four deepwater wells in the GAB, as it did not meet the criteria for acceptance under the environment regulations.

Similarly, neighbor New Zealand’s Taranaki basin, which covers approximately 100,000sq km both offshore and onshore is proving to be an attractive investment for explorers like New Zealand Energy (NZEC), AWE Ltd., OMV New Zealand, Todd Exploration, TAG Oil and Mosman Oil and Gas, to name a few.

Currently, producing oil from nine wells, NZEC is executing a comprehensive development and exploration program to further increase production in the basin. While OMV’s portfolio includes interest in the Maui, Pohokura and Maari fields within Taranaki, Todd is operator of six petroleum exploration permits.

Partnering OMV in the Maari oil field is Cue Energy, which also partners Todd in the offshore Aihe prospect. AWE, too, is developing the Tui Area oil project offshore Taranaki, producing oil from four wells, connected to the floating production storage and offloading (FPSO) vessel, Umuroa.

Conclusion

According to APPEA’s 2015 Key Statistics report, Australia is the third largest LNG exporting country after Qatar and Malaysia.

While oil, condensate and liquefied petroleum gas (LPG) production has been trending down since it peaked in 2000, APPEA says natural gas production has doubled since 1998. The country also still has significant quantities of discovered gas resources, much of which remains undeveloped.

New Zealand, on the other hand, holds vast petroleum potential and underexplored basins, mostly in the Taranaki region. The government aims to increase the value of petroleum exports from $2 billion (NZ$3 billion) to $20 billion (NZ$30 billion) a year by 2025, according to the New Zealand Trade and Enterprise.