SA ups the PACE to hit the gas

Against the gloomy background of a looming gas famine and associated energy crisis in Australia, South Australia announced the recipients of the first round of PACE Gas Grants with five exploration and development projects to share in $24 million in State Government funding.
Energy Minister Tom Koutsantonis said the grants would generate up to $174 million in new investment by oil and gas companies in local production projects.
In a statement Mr Koutsantonis said gas extracted through the grant scheme will be offered to South Australian electricity generators first, increasing the affordability of supply and putting downward pressure on power prices.
The State Government will also offer a new exploration licence for five blocks in the Otway Basin in the South East through a competitive bidding process to be finalised by the end of the year. The exploration area will not include the Coonawarra wine region.
The State Government’s royalty sharing program will first apply to this new exploration area.
The five PACE Gas Grant projects comprise:
• $5.82 million for the Senex-Santos Cooper Basin pipeline project
• $6 million for the Beach Energy Otway Basin exploration project targeting conventional reservoirs
• $3.96 million for the Santos Cooper Basin re-fracture stimulation project
• $6 million for the Santos Cooper Basin underbalanced drilling project
• $2 million for the first phase of the Strike Energy Cooper Basin deep coal project
Predicted gas shortfalls have been forecast for South Australia, New South Wales and Victoria in 2018-19 unless gas supply is boosted and a moratorium on exploration and onshore drilling is lifted in Victoria and NSW.
Australia’s wave of new LNG plants is currently putting pressure on gas production with gas from Queensland and South Australia being diverted to Gladstone’s three new export terminals as Australia exports twice as much gas to Asia as it consumes locally.
The volume of gas being produced surged from 2.3 petajoules in December 2015 to 24 petajoules at the close of the last fourth quarter.
Compounding the problem for an oil and gas sector that likes certainty and stability before committing to major investment, is that SA Liberal leader Steven Marshall has promised to impose a 10-year unconventional gas moratorium if he wins the next State election.
Nevertheless, following a thorough assessment of the applications received for PACE Gas grants, a panel of experts, including independent advisers, recommended the five successful recipients. The State Government has also committed to running a second $24 million round of PACE Gas grants.
Mr Koutsantonis said the Otway Basin consists of deep shale gas which could be extracted with far fewer well heads compared to coal seam gas, located much closer to the surface.
The South Australian government also announced a new royalty sharing program for landowners and said that the PACE Royalty Return program will first apply to new exploration licences in the South East.
“Today South Australians are presented with a clear choice between a State Government driving more gas production and Steven Marshall, who wants to ban gas. We are taking charge of our energy future and in South Australia that means making the most of our abundant wind, solar and gas resources.
“Steven Marshall’s policy, which has been repeatedly criticised by his Federal Liberal colleagues, will restrict gas supply and drive up power prices.
“There is enough gas in the ground in South Australia to power our grid for centuries, and this package of measures will help us extract more of that gas, boost local electricity generation and put downward pressure on prices.
“Given Mr Marshall has said he is not opposed to conventional gas development in the South East, I hope he publicly welcomes the announcement of Beach Energy’s conventional exploration project in the region,” Mr Koutsantonis said.

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