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Shaking up Australia's petro states

NEW South Wales' controversial bid to reserve gas production has drawn attention to the big diffe...

Shaking up Australia's petro states

Production data from economic consultancy EnergyQuest for 2013-14 show Australia's states might as well be different countries, such is the gap between output and the variation in growth.

At the bottom of the list is New South Wales, with an output of only one million barrels of oil equivalent, or less than 0.2 of a percent of national production of 534MMboe.

The state government announced last week a "NSW Gas Plan" to turnaround its dismal track record as state in welcoming petroleum investment, in particular coal seam gas exploration and development.

While the plan is generally seen as a positive for industry, it also highlights the fact that NSW will perhaps always be one of those states that just doesn't ‘get' the petroleum industry.

For example, the plan is focused on re-setting existing petroleum exploration licences and areas. It does not seem to allow for investment in new opportunities and exploration.

This means missed opportunities galore, if not even another energy crisis, for the state when the discovered CSG runs out - if indeed most of it is ever developed.

Ironically, the new plan also suggests a reservation policy, with one of the core principles being transparency of supply and the need "to demonstrate the development of NSW gas reserves will benefit the state's gas consumers."

The government apparently doesn't see a double standard in the fact that the NSW economy has depended for decades on the willingness of Victoria, South Australia and Queensland to sell gas to NSW.

Nor does it seem to get that if NSW is to be some kind of special, closed market on the east coast it might actually get no investment.

In complete contrast, South Australia and the Northern Territory are the fastest growing petroleum producers in absolute terms and arguably the model of what other states/territories need to do to attract investment.

SA and NT each boosted production by 5mmboe, to 34MMboe and 16MMboe respectively.

SA's growth was on the back of surging oil production on the western flank of the Cooper Basin, while NT received a big boost from the start-up of the Montara oil field in the Timor Sea.

SA is hungry for petroleum investment and has set the model for state regulation, according to a review by the Productivity Commission.

The state is also bending over backwards to welcome unconventional gas. A government-run roundtable for the unconventional gas development has been working for years on how to ensure local producers have the supply of skills and equipment to unlock the vast resources of the Cooper Basin.

Across the border, NSW and Victoria are either banning the industry or muddling their way towards new and uncertain rules.

South Australia's industry yesterday received a setback in the form of a state enquiry into fraccing, not across the whole state, but in the promising shale plays in the Otway Basin that are just starting to be explored.

The Weatherill government has fiercely opposed the inquiry, but was out-voted yesterday when a former Labor MP sided with the Liberal opposition and the Greens. The member, Bernard Finnigan, was expelled from Labor after being charged with child pornography offences.

At the top of state league table of producers sits Western Australia.

It's no surprise that WA tops the list, but readers might be taken aback by the size of its lead in a country that has long been regarded as having two great petroleum provinces - the North West Shelf and Bass Strait - and a booming CSG industry in Queensland.

Western Australia produced 341 MMboe in FY14, or 64% of national production.

By contrast, the continuing decline in production from the Bass Strait Joint Venture lowered Victoria's petroleum output to 78MMboe, or just 15% of the national total.

The rapid growth of Qld's CSG industry has had no impact on WA's dominance, with new projects such as Pluto LNG offsetting the growth in CSG on the east coast.

The imminent start of massive LNG projects on the east and west coasts means the state production figures are on the cusp of huge changes.

Queensland will add production of 25.3 million tonnes of LNG per annum when QCLNG, APLNG and GLNG all have their first trains commissioned. This is equivalent to 240MMboe, and would boost Qld production to about 300MMboe.

That would relegate Victoria to being one of the minor states in terms of petroleum production for the first time since the 1960s.

Even the NT will overtake Victoria, with the liquids-rich Icythys project boosting the territory's annual output from 16mmboe to almost 150MMboe.

Over on the west coast, Gorgon, Wheatstone and Prelude will add 28MMtpa of LNG, and almost double WA's production from 341MMboe to about 600MMboe, or almost double the output of Queensland.

WA's dominance looks set to continue indefinitely, followed by Queensland and the Northern Territory.

South Australia is the strongest challenger, and could surprise in the next decade if shale gas in the Cooper Basin and oil in the Bight Basin become a reality.

There is an accompanying state petroleum production rankings table attached to this story as an image.

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