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GAS CRISIS: What it means for drilling in Surat Basin

MORE drilling of gas is expected in the Surat Basin area over the coming years as coal seam gas companies look to shore up more domestic gas supplies.

The predictions from key experts in the resources sector come after Prime Minister Malcolm Turnbull announced possible restrictions on the level of gas that could be exported from Australia, in the wake of increasing domestic prices thanks to low supply.

EnergyQuest CEO Graeme Bethune, who analyses the production levels and outputs of gas companies across the country, said the problem was partly because of producers buying into the domestic market to meet their overseas demands.

Mr Bethune pointed out Santos GLNG was one of these companies, and said the consortium needed to drill more than ever.

"In terms of the total wells that have been drilled in the Surat Basin, GLNG has 600 wells, QPLNG has 1600 and QCLNG has drilled over 2400 since 2010-2011," he said.

"To be fair (to Santos GLNG), they are increasing their rate of drilling but they've not drilled anywhere near enough so they're buying from the domestic market.

"They're even buying gas from offshore Victoria to meet their demand."

The export restrictions are expected to be implemented by July 1, after talks between the Federal Government and gas producers failed to prove there would be an adequate supply.

Ian Macfarlane.
Ian Macfarlane. Kevin Farmer

MACFARLANE WANTS STABILITY IN SPOT GAS MARKET

Queensland Resources Council CEO Ian Macfarlane said the domestic energy crisis would result in more activity in the Surat Basin as Santos and QCG looked to fill their contracted export quotas out of Gladstone with its overseas partners.

But he said the issue wasn't helped with an expensive spot market, where gas was sold outside of existing contracts.

"People buy gas two ways - they either take long-term contracts, or if they get short of gas they've to go to the spot market," he said.

"The spot market is not a reflection on the global price (and) the spot price is higher here than it is in Japan.

"We've got to solve the short-term problem, to keep it under $10/gigajoules.

"It's also the industry goal, because we want to put stability back into the market."

On top of encouraging more drilling in the Surat Basin and longer-term plans to connect fields in the Northern Territory and Western Australia, Mr Macfarlane said NSW was not supplying enough of its own gas to feed the east coast demand.

"The gas industry in Queensland was set up based on the premise that NSW would look after itself," he said.

"NSW stumbled and fell because the greenies didn't want that developed.

"In the same time frame that we spent $70 billion, NSW did nothing - there's not one producing well in NSW."

Topics:  csg industry surat basin toowoomba


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