(EnergyAsia, March 19 2014, Wednesday) — Australia’s oil and gas sectors experienced contrasting fortunes last year, with oil production plunging to a 43-year low while natural gas output surged to an all-time high.
According to consultant EnergyQuest, the country’s oil production for 2013 plunged 18.6% to 71.9 million barrels or less than 197,000 b/d. This was Australia’s lowest level of oil output since 1970 when it stood at 65 million barrels or 178,000 b/d.
Natural gas production rose 3.1% to a record 2,214 petajoules, but this was not enough to offset the overall decline in the country’s total hydrocarbon production.
The result was a 1.4% decline in the total hydrocarbon output to 513.8 million barrels of oil equivalent (boe) in 2013, compared with 521 million boe the previous year.
EnergyQuest warns Australia’s combined oil and gas production could fall further as upstream companies had another poor year replenishing hydrocarbon reserves.
“Only 41% of gas produced was replaced with new gas reserves while the oil and liquids reserves replacement ratio crashed to -16%,” the company said in a statement. The negative ratio means that the country’s reserves fell even faster than production as companies continue to rapidly deplete the oil and gas fields.
On a brighter long-term note, EnergyQuest said companies spent a record A$60 billion, up from A$46.4 billion in 2012, mostly on infrastructure to produce and liquefy natural gas. Of concern is that some of the increase is due to a rise in building cost and project delays.
Since 2010, companies have spent more than A$155 billion out of a committed US$194 billion to develop LNG facilities in Australia’s west and east coast. (US$1=A$1.10).
Insufficient gas from coal seam projects
But there is concern that Australia may not have enough gas reserves to support the commissioning phases of the new projects, and will therefore need to draw on third party sources.
“There is little sign yet of spare gas to assist the LNG commissioning phases and the need for third party gas to assist in this process is growing,” said EnergyQuest CEO Graeme Bethune.
He said eastern Australia’s coal seam gas-based LNG projects faced a mammoth task over the next 18 months as they dewatered wells, completed surface facilities and began to ramp up maiden production.
“The potential for east coast gas prices to spike as a result is real, and there is potential for gas shortfalls on the east coast in 2015, 2016 and 2017,” he said.
“This situation is also driving east coast gas buyers into taking options on gas exploration in the Cooper Basin in outback South Australia, an extraordinary situation.”
LNG to tip current account balance into surplus
Dr Bethune said that even though Australia is substantially short oil, consuming 346 million barrels of crude oil and transport fuels in 2012-13 while producing just 140 million barrels of oil and liquids, the growth in LNG exports is likely to turn the nation’s petroleum trade deficit of A$14.1 billion in 2013, into a surplus.
“Rather than being negatively exposed to oil price increases, the Australian economy will be positively exposed and not only is LNG likely to turn the petroleum deficit into a surplus, it is also likely to help turn the national current account deficit into a surplus for the first time since 1975,” he said.
“Assuming current LNG prices, EnergyQuest estimates that the growth in LNG production will increase the value of LNG exports from A$14.7 billion in 2012-13 to A$57 billion by 2018, similar to the current value of Australia’s number one export, iron ore.”