On track to become the world’s largest LNG exporter by 2020, Australia’s energy scene is undergoing a transformation as gas production from coal seams boosts supplies and the technically recoverable potential of shale gas lures investors.

Speaking during the Australian American Chamber of Commerce’s energy conference Jan. 30 in Houston, BG Group’s Catherine Tanna said Queensland is expected to account for one-third of the country’s production by 2020.

“Queensland’s 25.3 million tons of production per year will be equivalent to 5% of the global supply and will eclipse Russia for sixth place internationally,” said Tanna, chairman of the company’s Australian operations. “Later this year, BG Group’s Queensland-Curtis LNG project is scheduled to export the first cargo of Queensland LNG. Two other Queensland projects, Australia Pacific LNG and Gladstone LNG, are expected to begin production the following year.”

The state is home to stacked sedimentary basins that range in age from Paleoproterozoic to Quaternay, according to the Department of Natural Resources and Mines. The Bowen and Surat basins in particular have been the sites of significant coalseam gas discoveries. Production from the two basins makes up more than 79% of total gas produced in the state.

BG Group is pumping more than US $20 billion into its Queensland-based projects that focus on converting gas from coal seams into LNG. The project is one of seven LNG projects, two of which are in Queensland, under way in Australia. These, according to the Australian Petroleum Production & Exploration Association, include:
• Queensland: $24.7 billion Australia Pacific LNG, with a 9 mmpta capacity and a 2015 start date; $20.4 billion Queensland Curtis LNG with an 8.5 mmpta capacity and a 2014 start date; $18.5 billion Gladstone LNG, with a capacity of 7.8 mmtpa and a 2015 start date;
• Offshore West Australia: $29 billion Wheatstone LNG with an 8.9 mmtpa capacity and a 2016 scheduled start date; $13 billion Prelude LNG with a 3.5 mmtpa capacity and a scheduled 2017 start date; the $54 billion Gorgon LNG with a planned 15 mmtpa capacity and a scheduled start date in 2015; and the $34 billion Itchthys with an 8.4 mmtpa planned capacity and a 2016 scheduled start.

The climate was different in Australia more than a decade ago.

“As late as 2007, nobody foresaw the full potential of gas from coal seams, and even Queensland was considering importing gas from Papua New Guinea to Australia’s north,” Tanna noted. “Less than a decade before that, companies such as Shell and Woodside were thinking of building a 2,000-km [1,243-mile] pipeline to gas from Australia’s northwest to Queensland. The pace of change can be remarkable.”

She compared the atmosphere to the “shale gale” in the US and noted that the state is about to increase its gas production fivefold. “Queensland’s gas basins with much of the resource untapped are literally bigger than Texas, and our three LNG projects will supply enough gas to power Asian cities with a total population of 80 million people for 20 years,” she said.

Plans are for more than 18,000 wells to be drilled in the next 20 years. “Our project alone has drilled nearly 2,000 wells, and we have plans for a further 4,000,” Tanna continued. “The pipelines to connect them all for our project alone would reach from Houston to Brisbane and more if laid end to end.”

While coalseam gas has attracted the attention of BG Group among others, other unconventional hydrocarbons – including shale oil and gas as well as tight gas – are beckoning others to the region. The Cooper/Eromanga basin has proven to be a productive play trend, straddling the South Australia/Queensland border.

“In that proven productive play trend, where people have acquired 3-D seismic, 56% of the wildcat exploration wells have found oil and an average of 2.5 MMbbl,” said Barry Goldstein, executive director for the energy resources division of South Australia’s Department for Manufacturing, Innovation, Trade, Resources, and Energy.

There are now 23 companies in the play – the latest additions being New Standard and Magnum Hunter – under 10 different operators, Goldstein said.

Companies active in the play include Chevron, ConocoPhillips, Statoil, Total, Hess, and BG Group. Santos Energy was the first to achieve commercial shale gas flow at the Moomba field in the Cooper basin in 2012. Santos, operator of the joint venture with Beach Energy and Origin Energy, announced in December 2013 that the Moomba-194 vertical shale gas well flowed gas at an average rate of 85 Mcm/d (3 MMcf/d).

What distinguishes the Cooper basin for others is that it’s a basin-centered gas play, so the “shale of the coals are interspersed with siltstones and sandstones or the source rock, and they’ve been yielding gas in excess of the rate of the gas being able to escape,” Goldstein continued. “This is a stack of rock anywhere from 600 m [1,969 ft] to 1,200 m [3,937 ft] of thickness, which is fully gas-saturated and dehydrated. The only water you get out of production out of the Cooper basin is water condensation – pristine, no salt in it.”

An advantage is that operators don’t have to start off drilling horizontals.

“We can actually, like in the Permian play here in the [US], drill verticals [and] have a kilometer of rock to frac,” he said, adding the verticals are about half the cost of the horizontals. “That’s going to be a particularly important thing. … There is a considerable gas prize in the unconventionals onshore.”

Australia could have an estimated 13 Tcm (437 Tcf) of technically recoverable shale gas reserves – the sixth highest in the world – and more than 17 MMbbl of technically recoverable shale oil reserves, according to the US Energy Information Administration. In addition to the Cooper basin, the eastern Maryborough, offshore Perth, and northwestern Canning basins hold shale resources.

But “that is potential,” Goldstein said. “We’re not sure that it is all going to work economically.”

Watching the rig count will give an indication of the health of this basin. By pairing people in Australia who have the competence and capacity to work with the expertise of companies such as Halliburton, Schlumberger, and Baker Hughes, those operating in Australia can learn and be able to keep costs down, Goldstein continued.

“It’s very much a question of being competitive in an international LNG market,” he said. “It’s very few places in the world where you can have a coin toss chance of finding 2.5 MMbbl.”

Contact the author, Velda Addison, at vaddison@hartenergy.com.