rio admits gas shortage , page-3

Gas price rise prompts Santos to revamp Cooper Basin
Matt Chambers
May 23, 2011 12:00AM
SANTOS is gearing up to breathe new life into its onshore Cooper Basin gasfields, embarking on a $120 million drilling program to bring the 40-year-old Moomba gas plant in the central Australian desert closer to the production levels of its heyday.
Growing export demand and the potential for carbon-price-driven gas power stations are pushing Santos to extract all the conventional gas it can to supply Moomba, which draws onshore gas from an area the size of Victoria and has cost $8 billion to develop so far.
Santos is drilling between its existing 576 production wells and is expected to hit more gasfields in the basin, which straddles the South Australian and Queensland borders.
Now, instead of one well every 80ha, there will be one drilled every 20ha.
"Ultimately, it will allow us to sustain current production levels (and) probably grow them," chief executive David Knox said during a visit to the site this week.
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"And we can respond -- if the market did climb harder than we model, we can respond, with partners' support, to supply that market."
Moomba, 67 per cent owned by Santos, 20 per cent by Beach Energy and 13 per cent by Origin Energy, is producing about 300 terrajoules of gas daily, down from its peak of about 700TJ daily around the turn of the century.
By comparison, Woodside Petroleum's North West Shelf project, the nation's biggest domestic gas plant, produces about 600TJ daily.
The plant will regain its peak production because the gas now has higher carbon dioxide levels -- about 20 per cent -- which must be removed. It is currently released into the atmosphere.
"We're looking at steady state, probably in the order of 400TJ a day," Santos eastern Australia vice-president James Baulderstone said.
"There is a substantial amount of conventional gas left and what has changed is market demand," he said.
"We're talking about a doubling or tripling of demand on the east coast."
Because there was little growth in east coast demand for gas, Santos did little exploration in the Cooper Basin over the past 10 years.
The real driver for the Moomba plant was an oil-price-linked supply deal with the Santos-led Gladstone Liquefied Natural Gas plant.
The $US16bn ($15bn) plant, in which Santos has a 30 per cent stake, will mostly use Queensland coal-seam gas, but it will also take 10-15 per cent of its gas from the Cooper Basin.
Santos said the new drilling rigs it had commissioned for the infill drilling would shave about 20 per cent from its costs.
The drilling will test the Cooper Basin's potential for shale gas -- the unconventional gas that has turned US markets on their head but also sparked protests from landowners.
Mr Knox said shale gas could be produced from Cooper if eastern state gas prices rose from $3-$4 a gigajoule to about $6.
Technology that releases gas from shale rock by fracturing the rocks underground (known as fracking) has turned a US gas shortage into a glut.
"We'll do conventional and slowly move into the unconventional over time," Mr Knox said. "We're not talking one or two years. We're talking in the next 10-20 years."
Beach managing director Reg Nelson, who was also visiting Moomba, said his company had other shale gas ground he was hoping to have in production "in a matter of years, not decades".
Mr Nelson said one of the key concerns in the US had been contamination of water.
"From the nearest potable aquifer to where we are looking in terms of distance, there's around 1500m to 2000m, so the probability you'll contaminate any aquifers with fracking is zero," he said.
Mr Baulderstone said the price necessary to realise the Cooper Basin's shale potential would not necessarily mean a big rise in retail gas prices.
"The wholesale gas price is $4 (a gigajoule) roughly. What you pay when you turn on your stove is $21," he said.
"Even if that price doubled, it would only add another 20 per cent on to their price, so we are very comfortable."
The price movement needed to make these large volumes of gas economic "isn't very significant".
Mr Knox said the Cooper Basin could continue to supply gas for 50 years.
The basin's production was hit by heavy rains over summer but the ground is starting to dry out and there are signs that rainfall is returning to normal.
As well as gas, the Cooper Basin produces about 30,000 barrels a day of crude oil and other petroleum liquids.
 
Hi guys -although this article is a year old it's important to revisit ongoing trends and beliefs - the article reinforces the gas infilling program , STOs reliance on it's gas partners to deliver the goods and positivity about shale . I like the fact that 6 dollars gas would only have marginal impact on retail prices. One thing not mentioned is the electricity prices are likely to cause a shift to gas