AUSTRALIA

Innovators swimming strongly in upstream Australia

THE changing face of Australias petroleum industry is creating major new growth opportunities for...

Innovators swimming strongly in upstream Australia

Speaking at the AustralAsian Oil and Gas conference, the energy analyst and consultant said the sector was becoming increasingly competitive and innovative thanks to a combination of high oil prices, growing demand for natural gas and the need to boost production from and expand beyond Australia’s ageing petroleum basins.

Gas and coal seam methane players were doing particularly well, he said.

“The theme is that our oil and gas production is dominated by four to five major companies,” Bethune said.

“But in the upstream, we are beginning to see a flowering of the sector, which can only be a good thing for the development of oil and gas in Australia.”

The top five petroleum producers of 2006 were the usual suspects – BHP Billiton, Woodside, Santos, ExxonMobil and Chevron.

But of those, only one appeared on the list of companies to have achieved the biggest growth in production during that time.

Japanese oil giant Mitsui topped the list, having added 4.9 million barrels of oil equivalent (MMboe) of output, second spot went to Beach Petroleum, with 4.2MMboe, then came Santos (3.2MMboe), then Australian Worldwide Exploration (2.5MMboe) and Apache came in at number five (1.6MMboe).

But more interesting were the figures for Australia’s gas producers, where he said local mid-caps, such as Beach, Arrow Energy, AWE and QGC were producing similar volumes to some of the world’s largest petroleum companies, such as Apache, ConocoPhillips and Eni.

“Australia’s gas production has doubled since 1990 – due to domestic growth and also a big-leg up thanks to LNG,” Bethune said.

Last year, Australia’s CSM sector grew 32.8% to 81 petajoules of gas, while conventional gas increased 1.5% to 828PJ, representing an overall domestic growth of 3.5%. LNG production grew at a similar rate of 3.4% to 681PJ.

While Australia’s gas industry continues to grow in leaps and bounds, things went from bad to worse for the oil sector.

Bethune pointed to figures that showed production of oil fell 5.6% from 124 million barrels to 117MMbbl in 2006.

“Looking at the list in Australia, the oil fields coming online are small and are unlikely to reverse this decline,” he said.

“The only way we would manage that is making another major discovery like the Bass Strait…but the risks are high.”

But it was not all doom and gloom for industry, as high oil prices meant other options were looking increasingly attractive.

Bethune said the five main corporate strategies being employed to offset the declining production were: overseas exploration; commercialising marginal fields such as Basker-Manta and Puffin; a focus on liquids-rich gas developments; and non-conventional energy sources such as gas-to-liquids, coal-to-liquids, oil shale and biofuels.

“It’s interesting to note the number of new oil fields, such as Santos’ Mutineer-Exeter and Woodside’s Enfield, brought online in recent times that have had problems of one kind or another,” Bethune said.

“It could be a sign that companies are being forced to move into harder to develop fields.”

Only yesterday, Woodside announced it has halved its expected share of proved (1P) Enfield oil reserves, from 57.9 million barrels to 27.1MMbbl. Its share of proved and probable (2P) were downgraded from 76.6MMbbl to 44.1MMbbl.

Discovered in 1999, Enfield started producing oil mid last year.

Elsewhere in north-western Australia, the Santos-operated Mutineer-Exeter field is also in rapid decline.

The field produced $A1.33 billion for Santos in the last quarter of last year, down from $A1.48 billion in the previous quarter and $1.9 billion in the last quarter of 2005. Another Carnarvon Basin field, Stag, is also declining.

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